Australia's Amcor says it is now the market leading packaging company in eastern China following its acquisition of the flexible packaging operations of the country's Jiangsu Shenda Group.
The acquisition, for RMB350 million ($A62.2 million), is expected to reap returns of more than 20 per cent of the purchase price by 2016 based on cost synergies and organic growth in the Chinese market, the company said.
The agreement is subject to regulatory and other conditions and is expected to close in the coming months.
Jiangsu Shenda Group has sales of approximately RMB440 million and two plants in the Jiangsu province in eastern China.
Two thirds of it sales are to the pharmaceutical, snacks and culinary end markets.
Amcor’s managing director and CEO Ken MacKenzie said the purchase would transform the company into a powerhouse in the Chinese market.
“Continued strong growth in consumer spending makes China one of the most attractive markets globally,” he said.
“Amcor has a strong and successful position in the Chinese flexible packaging market with nine plants, covering all the key regions and sales of over $400 million.
“This acquisition establishes Amcor as the market leader in eastern China, a region that represents approximately 40 per cent of China’s GDP. The business is a strong fit with our existing operations and offers considerable synergy opportunities.”
The latest purchase builds on a series of acquisitions in the flexible packaging market in recent years, including the $238 million buyout last year of the Aperio Group. The company's flexibles business grew 14.3 per cent in the first half of the 2012-2013 financial year.
It also marks a further concentration of its emphasis on emerging markets such as China and India. In its most recent financial statement, it said developing markets now accounted for a fifth of its group sales.
The company has also announced, subject to expected regulatory approvals, the sale of its paper making plant in Fairfield, Victoria, for $120 million.
The purchaser is a consortium led by Alpha Partners Pty Ltd and a company associated with Glenvill Group.
The proceeds will be paid progressively over a four year period with Amcor receiving a $10 million deposit on exchange of contracts. The profit on sale is anticipated to be approximately $60 million.
The plant was shut in December last year as part of a rationalisation of its paper making operations in Australia following the commissioning of its new B9 recycled paper making mill in Botany, Sydney.
Jiangsu Shenda's factory in China. Amcor's acquisition of the company will catapult it to become one of the country's leading packaging companies.
