JP buys 51% of BJ Ball and KW Doggett for $75m

JP buys 51% of BJ Ball and KW Doggett for $75m
Deal sees BJ Ball acquire KW Doggett, with $6bn Japan Pulp & Paper then taking majority share of new $450m merchant

Two of Australia’s big three paper merchants BJ Ball and KW Doggett are merging and being bought by paper giant Japan Pulp & Paper (JP), which is paying $75m for a majority share in the new business, set to become the country’s largest paper merchant.

Under the deal BJ Ball AU will acquire 100 per cent of KW Doggett and BJ Ball NZ. Then Japan Pulp & Paper will pay $74,949,600 for a 51 per cent stake in the new company, PagePack AU. This company will own 100 per cent of BJ Ball AU, BJ Ball NZ and KW Doggett.

Other shareholders will be PagePack NZ – the current owner of BJ Ball – with 29 per cent, KW Doggett Properties with 16.2 per cent, and Ken Ardcowan Pty which will own 2.86 per cent. The latter two entities are the current owners of KW Doggett.

JP though has the option to buy the remaining 49 per cent of shares of BJ Ball AU in two to three years’ time.

The whole deal is subject to the approval of the ACCC, the companies have July as the tentative date for the deal to go through.

[Related: Paper prices going up]

BJ Ball Australia had sales of $287m in the 2016 financial year, while KW Doggett sales were $162m. Between them the two merchants had $449m in sales, more than double that of rival Spicers Australian sales, which stood at $209m in the same year. BJ Ball is already the biggest merchant in New Zealand with sales of NZ$202m in 2016.

Local paper merchants have had a torrid time since the GFC, as paper consumption by Australian printers has declined since then, resulting in lower volumes and razor thin margins. Consolidation is impacting every area of the print business as companies recalibrate to meet the new market. The two biggest printers PMP and IPMG have just joined forces, the two biggest outdoor media companies oOh! and APN are also aiming to merge, and the two biggest magazine publishers are also in talks about merging.

Management details of the new entity have yet to be released, but the Doggett family – which has Simon Doggett as managing director - will remain actively involved in the new business, although founders Ken and John Doggett will retire.

Consolidation of sites is almost certain, in Australia BJ Ball and KW Doggett both operate out of Melbourne, Sydney, Brisbane and Adelaide, with BJ Ball also having operations in Perth and Hobart.

The deal is consistent with JP’s strategy of expansion into non-Japanese paper wholesaling. Seven years ago the company acquired massive US merchant Gould Paper, and two years later bought India’s KCT Trading.

JP was established in 1845, it has 3100 staff operating in 22 countries, and has an income of ¥506bn (A$6.1bn). It is both a merchant and a paper manufacturer. It is a publicly listed company on the Nikkei, with banks, paper businesses and pension funds its major shareholders. It paid almost $1bn to buy Carter Holt Harvey’s pulp and paper manufacturing arm from New Zealand’s only billionaire Graham Hart three years ago.

KW Doggett is owned by the Doggett family, it started in the 1975, and the second generation is now running the operation. Beginning as a fine paper merchant Doggett has expanded into packaging, wide format and digital papers in recent years.

BJ Ball incorporates the old CPI business, with Craig Brown as CEO. BJ Ball was founded in 1918, and came back into the Australian market in 2011 when p/e owner Maui Capital bought the struggling CPI, along with Raleigh Paper and Focus Paper. Brown became CEO in the same year, and since then has expanded the business into new markets including wide format and digital papers, acquiring half a dozen business along the way.

Craig Brown says, “BJ Ball has always strived to be a diversified and progressive supply partner to the graphic communications market. Joining forces with KW Doggett Fine Paper and JP has been carefully considered and we have no doubt this next step will future-proof our position while also being supportive of the industry long-term.”

“Through pooling our resources and accessing JP’s global network, we will create a more robust and resourced business. We believe this will add value for customers on both sides of the Tasman.”

“With the print market changing globally, this new entity is structured to meet the future head-on. Through combining two strong businesses and adding a heavyweight global partner, our business will have enhanced buying power, better access to new product categories, continuity of supply and a business model which is sustainable long term (both for suppliers and staff).”

[Related: BJ Ball to buy West Graphics]

Simon Doggett  says “The coming together of three industry aligned stakeholders means we can fast track diversification, improve customer value and bring our ‘way of doing business’ to a much bigger platform. High levels of customer service and providing staff with a great place to work are a key focus for the new entity”.

Akihiko Watanabe, President, JP says, “The Australasian market has long been attractive to JP. The opportunity to enter this market with such a strongly-aligned partner enables us to leverage significant existing relationships and introduce more diverse products here. We look forward to the ongoing benefit this will bring to the market and customers and becoming a long term partner to the ANZ market.”

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