PaperlinX to Sell Assets in Eastern Europe, South Africa

PaperlinX Ltd., Australia, this week announced that it will sell its operations in Slovakia, Hungary, Slovenia, Croatia, and Serbia to the Heinzel Group of Austria for EUR 19 million. The sale price represents a multiple of approximately 10x EBITDA and is A$2 million above book value. Net proceeds after debt and transaction costs are expected to be approximately EUR 17.5 million (A$21 million).

The company said it also will sell its "loss-making operations" in South Africa to local management. Net proceeds of ZAR 50 million (A$6 million) will include A$3 million repayment of parent company funding and A$3 million purchase consideration for the shares, representing a loss of approximately A$2 million against book value.

The announcement concludes PaperlinX's Strategic Review that began some 12 months ago.

Commenting on the transactions, PaperlinX CEO, Toby Marchant said that "after the sale of five smaller European businesses and the consistently loss-making South African business announced today, our remaining businesses all operate in sizable markets with significant market positions. All have growth opportunities in diversified products and are the focus of the previously announced restructuring activities. We can now direct our limited resources to these challenges and opportunities while at the same time ensuring that we have sufficient liquidity both regionally and for the Group."

Marchant also announced that he will resign his position as CEO at the end of this month (see article in PULP & PAPER section below).

Richard Barfield, recently appointed CFO, noted that "the disposals in Eastern Europe and South Africa are expected to close over the next three months, subject to competition clearance for both transactions and exchange control clearance for South Africa. The additional liquidity generated will further reinforce our ability to improve financing arrangements and margins in Europe, as well as provide additional funding to support accelerated restructuring and diversification."

In other matters, PaperlinX also announced that in response to the ongoing difficult trading conditions and losses, company directors voluntarily cut their fees by 15% from April 1 of this year. Most senior managers in the U.K., Europe, and Australian corporate also recently took a temporary pay cut of approximately 7.5% on a voluntary basis.