The European corrugated box industry is experiencing an active period of mergers and acquisitions, driven by the large-scale consolidation that has spread to the global economy. According to a new report from RaboResearch, making new add-ons and medium-sized acquisitions now tend to be more important than adding capacity. The findings also show that paper companies may begin to seek to expand into more dispersed areas in Europe and other overseas territories and focus on higher-value products and customers.
A few weeks ago, Smurfit Kappa and Westrock formally merged on the New York and London stock exchanges, setting off a flurry of important M&A activity. The report considers the merger a "game changer" for the industry, as other large-scale merger attempts followed and were successful. For example, International Paper acquired Desma for $7.2 billion, and Shuzan Eunos subsequently made an unsuccessful bid for International Paper for $15 billion.
These large transactions often result in newly formed companies selling or shutting down assets and establishing new business entities. RaboResearch said that while the outcome remains to be seen, they “are undoubtedly expected to reshape the market”.
The report states that the main strategy now adopted by many companies in Europe is to carry out M&A activities in regions where the market is less concentrated. While regions such as the UK are dominated by a few companies, such as Desma, Smurfit Kappa and Saica, these companies have been expanding their network to regions such as the Iberian Peninsula, France and Italy in the past few years.
Some companies are also actively seeking to capitalize on the Eastern European market. Last year, Desma acquired Serbian packager Bossis, while Coveris recently acquired Polish packager Hardboll Flexible Packaging, the company’s fourth acquisition in Central and Eastern Europe.
Recently, Saica Group has reached an agreement with Schumacher Packaging to acquire its Polish subsidiary, which includes all operations in Poland: the entire management, all employees, 2 secondary plants in Bydgoszcz and Wroclaw, 2 paper mills in Grudziądz and Myszków (one of which was completely modernized in 2023) and 3 service centers. The completion of the transaction is subject to the approval of the Polish antitrust authorities and the satisfaction of certain preconditions.
RaboResearch also noted that Italy has become a "hot market" as changes in the country have made it attractive for large companies to start taking over businesses at the expense of traditional family-owned businesses. For example, last year Mondi acquired the Duino plant near Trieste, Italy, from the Burgo Group and plans to invest about $217 million to restructure the plant.
In May this year, Saica Group reached an agreement with the family owners of LIC, a packaging, display and packaging solutions provider, to become the company's major shareholder. LIC's factory is located in the province of Brescia in the Lombardy region in northern Italy, with revenues of 120 million euros in 2023 and 351 employees. Saica acquired a minority stake in the company in 2001, which enabled LIC to expand its facilities and enter international markets.
Earlier, Zeus, a packaging group headquartered in Ireland, announced the acquisition of the Wieden Group, one of the largest independent integrated corrugated box manufacturers in the UK. The Wieden Group has annual sales revenue of more than 30 million pounds and has more than 250 employees at two production bases in the UK. The acquisition of the Wieden Group will bring Zeus' expected annual sales revenue to 560 million euros.
The acquisition brings Zeus' annual revenue to £560m and continues its acquisition-led growth strategy. The merger comes at a time when large-scale consolidation is underway between Smurfit Kappa and Westrock, as well as International Paper and Desma, as companies try to take on larger rivals.
The Wieden Group is an integrated manufacturer of corrugated packaging with three business units - Wieden Corrugated Products, based in Aldenshaw, near Manchester, operates corrugated board production lines, produces board for industrial and transport packaging, supplies its own carton business and others. Wieden PSC, based in Herdnesford, Staffordshire, produces POS displays and printed packaging for the retail market. The i2i Europe Creative Solutions division develops packaging solutions for the private label market.
The researchers said they expect other large players to enter larger geographic areas, often with access to virgin fiber as a co-driver.
Prior to the merger with Westrock, Smurfit Kappa had been making smaller add-on acquisitions, acquiring conversion assets in the U.S., Mexico, Colombia, Peru, Argentina and Brazil. Other examples include Desma’s first foray into the U.S. in 2017, Klingler Paper & Packaging’s expansion into Brazil in 2020, and Beery’s entry into the U.S. in 2021.
Likewise, companies outside Europe are seeking to merge within the continent, with International Paper's acquisition of Desma being the most recent and notable example. Smaller companies such as Japan United and KPP Group have also merged in Europe through their subsidiaries.
The report states that the trend of significant M&A transactions is expected to continue over the next decade as companies adapt to market changes in "a still very fragmented industry." Increasing competitive pressures, regulatory challenges and changes in the customer base create a stronger foundation for further market consolidation. Larger players, while maintaining their focus on the strategic European region, are likely to explore opportunities to enter or expand in more fragmented regions, and they will continue to view the United States as a highly profitable market because regulatory and energy pressures are less severe.
