Packaging and paper giant Smurfit Kappa has set its sights on acquisition targets in China, UK’s Daily Telegraph reports. The company claims it is most likely to buy box-making factories, but is also considering building a paper mill, which would be a first for the company.
The company, with £500m of cash and credit facilities of more than £750m, sees acquisition targets emerging around the globe as the industry heads for a slowdown caused by the economic slump.
Gary McGann, chief executive of Smurfit Group told the Daily Telegraph that the company, formerly Jefferson Smurfit Group, withdrew from the Chinese market in 2003 to cut costs. However he says now it is in China where he sees some of the best opportunities, adding the country's packaging and paper industry is fast-growing, but fragmented.
A mid-sized box plant costs around £30m, and McGann believes Smurfit might need three or four to achieve economical scale. But a mid-sized paper mill would be a more substantial investment, perhaps £200m to £250m, he told the paper.
“It is almost inevitable that we will go back into China,” McGann told the Daily Telegraph, which adds he and Ian Curley, finance director of Smurfit Kappa were in China two weeks ago looking at companies.