Assets in the country are estimated at $200 million, sources say

10/25/2022

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Luis Bueno — Foto: Sergio Zacchi/Divulgação

Suzano agreed to buy Kimberly-Clark’s tissue paper operation in Brazil. The two companies did not reveal the value of the transaction, but sources estimate that the U.S.-based company’s assets in the country are valued at around $200 million. With the acquisition, Suzano will have a 22% market share and gains muscle in the Southeast region, Brazil’s largest consumer of toilet paper.

Originally, Kimberly-Clark put its Latin American operations up for sale and wanted to sell the whole package with a single buyer. Sources said that the Latin American operation was valued between $750 million and $1 billion. J.P. Morgan, which advised the company, is still tasked with selling the regional business.

In Brazil, Suzano was competing with Singapore-based company RGE, the owner of Bracell. According to a source familiar with the deal, the Brazilian company presented two proposals, one for the whole package and another for the tissue assets in Brazil, which was seen as more attractive.

With the acquisition, Suzano becomes the owner of traditional retail brands, such as Neve, and of a tissue plant with an annual capacity of 130,000 tonnes in Mogi das Cruzes, São Paulo. The company already had tissue plants in Mucuri (Bahia), Imperatriz (Maranhão) and Cachoeiro de Itapemirim (Espírito Santo), as well as units in Belém (Pará) and Maracanaú (Ceará). “The complementarity of product categories and geography will allow us to further improve the service provided to different customers and offer a more complete portfolio to consumers throughout Brazil,” said Luís Bueno, Suzano’s head of consumer goods and corporate relations, in a note.

Kimberly-Clark’s other brands in the country, such as Kleenex and Scott, will be licensed to Suzano for a “determined term,” according to a statement sent by Suzano to the Securities and Exchange Commission of Brazil (CVM). The closing of the deal is subject to certain conditions precedent, including approval by CADE, Brazil’s antitrust regulator. Diaper and pads operations were not included in the sale.

In a statement to the market, Kimberly-Clark said it sold its tissue operation and that the multinational’s efforts in Brazil “will focus on accelerating the pace of growth of its Huggies, Intimus and Plenitud personal care brands.” “On a global scale and in Latin America, Kimberly-Clark’s tissue and professional categories continue to play a key role in the company’s portfolio, with leading brands in many of the markets where it operates.”

Suzano, owner of brands Mimmo and Max Pure, is already the leader in tissue the North and Northeast regions, while Kimberly-Clark operates mainly in the Southeast region. Only the Neve brand has a nationwide share of 8.3%, according to Euromonitor data. According to the consulting company, the sales of the toilet paper segment reached R$9.08 billion last year.

With the buying of Kimberly-Clark’s assets, Suzano makes the opposite way of the American giant. Until recently, Kimberly-Clark was also a large pulp producer, but began buying raw material from competitors because its costs as a producer increased, said an industry source.

The Brazilian tissue industry has been the scene of major merger and acquisition operations for at least four years and announcements of investment in new plants. This year alone, the amount exceeds R$4.2 billion, excluding the sale of Kimberly-Clark’s assets.

In June, Softys, owned by the Chilean group CMPC, took over the Rio de Janeiro-based Carta Fabril, producer of the brands Cotton and Coquetel, and took the leadership of the Brazilian market of toilet paper, with a share of almost 30%. The acquisition was closed for R$1.14 billion, excluding debt. Previously, Softys had already acquired Paraná-based Sepac for R$1.3 billion.

Santher, a traditional Brazilian tissue company, has also changed hands. In June, the Japanese companies Daio Paper and Marubeni acquired it for R$2.3 billion.

The new cycle is also marked by the arrival of more competitors in the domestic market. Bracell itself has already confirmed that it intends to install a tissue plant next to the pulp mill in Lençóis Paulista (São Paulo), with a total installed capacity of 240,000 tonnes per year.

*By Stella Fontes, Mônica Scaramuzzo — São Paulo

Source: Valor International

https://valorinternational.globo.com/