By Cindy Macdonald
Merger and acquisitions deal activity finished on a strong note in 2015, according to PwC’s analysis. The highlight of the quarter was the merger of Weyerhaeuser and Plum Creek Timber which creates a world leader in the forest products sector.
Global M&A activity in the forest, paper and packaging (FPP) sector in Q4 2015 saw an increase in deal volume and total deal value relative to the third quarter of 2015. A total of 39 M&A deals were announced during Q4 2015 with a total value of US$14.8 billion and an average (median) deal size of approximately US$22.2 million. This compares to 26 deals in Q3 with a total value of US$1.4 billion and an average (median) deal size of approximately US$11.3 million.
Over the full calendar year, there were 143 deals announced in 2015 worth nearly US$31.9 billion, which is higher than 2014 in terms of deal volume and deal value (125 deals worth approximately US$9.4 billion) as well as average (median) deal size.
The five largest announced deals in Q4 2015 (based on deal value) accounted for approximately US$13.6 billion or 92% of total deal value, primarily due to the size of the Weyerhaeuser & Plum Creek Timber merger. These top five deals included two deals in each of the Americas and Asia/Pacific regions, and one transaction in the EUMEA region, whereas the top five largest deals in Q3 2015 were more focused in the Americas region.
Deal activity continued to be strong in the Americas region in Q4 2015, highlighted by the following:
• Weyerhaeuser and Plum Creek Timber merged to create a world leading forest products’ company with more than 13 million acres of timberland, making it the largest private landowner in the U.S;
• SCA Americas, the North-American division of Swedish paper and hygiene products maker Svenska Cellulosa Aktiebolaget acquired Wausau Paper Corp, a US tissue maker for US$513 million in cash plus assumed liabilities.
• Boise Cascade Company acquired Georgia-Pacific LLC’s engineered lumber production facilities located at Thorsby, Ala., and Roxboro, N.C., for US$215 million, including working capital; and
• West Fraser Timber Co. Ltd. acquired Manning Diversified Forest Products Ltd. which has sawmill operations and related coniferous timber harvesting rights located in Alberta, for a purchase price of approximately US$51 million plus working capital.
In the upcoming quarters, the authors expect deal making to continue to be strong in the sector as companies look to gain strength in core markets. Trends that are impacting the sector include:
• The pace of strengthening in the U.S. economy,
• Global economic uncertainty,
• Accessing high growth Asian markets,
• Security of fibre supply.