Kotkamills PDF

Acquired : July 10 2010
Acquired From : Stora Enso
Industry : Paper and Packaging
Transaction Type : Corporate Carve-out
Realized : March 25, 2015
Sold To : MB Funds
Headquarters : Kotka, Finland
Investment Strategy : Turnaround

Kotkamills is based in Kotka, Finland and manufactures high-quality specialty papers and wood-based products for laminate, plywood, construction and magazine industries globally. The Company has additional operations in Malaysia and in Tainionkoski, Finland. With roots dating back to 1872, Kotkamills is recognized for its excellence in production, customer service, research, product development and sustainability efforts, and is known for products such as the Absorbex, Imprex and Solaris brands.

kotkamills

Sourcing

In 2007, OpenGate’s Business Development team identified Kotkamills as a prospective corporate carve-out investment and established a direct dialogue with the Company’s corporate parent, Stora Enso.  When Stora Enso reinitiated the sale of Kotkamills in 2010, OpenGate was well-positioned to compete for the Company due to its established relationship with the seller.

Transaction Highlights

Given the global economic crisis, and the subsequent decline in performance, StoraEnso was motivated to find an acquirer that could manage a successful yet complex carve-out and transition of Kotkamills.

Investment Merits

  • Corporate carve-out of non-core asset
  • Opportunity to improve operational efficiencies and increase profitability by centralizing the laminate, wood, magazine paper and timber businesses
  • Long-standing customer base includes the largest publishing companies in Europe and North America
  • Well maintained / adequately funded asset base with opportunity to reorganize manufacturing processes to achieve higher margins
  • Potential to increase volume in all business lines by implementing a dedicated sales force

Stabilization

  • Appointed key senior managers, including President, VP of Operations, Director of New Business Development and Sales and Technical personnel
  • Diversified raw material and service supplier base and renegotiated supply agreement with former owner
  • Oversaw rationalization of product portfolio and implemented a factory improvement plan which increased machine efficiency and energy savings
  • Implemented a fixed cost reduction program by reorganizing the maintenance and central functions
  • Designed a plan to mitigate lower demand for magazine paper by repositioning the product as a niche versus commodity paper

Growth

  • In 2012, sold a 10% shareholder position to Powerflute Oy, one of the largest packaging companies in the world, which provided cash for growth
  • Magazine paper (Solaris) sales volume increased by more than 20% following the installation of a new and independent sales network
  • Developed the first-ever, 100% recycled fiber laminating paper product that was produced at a lower cost, sold for higher margins and ultimately repositioned the product as the number one recycled laminating paper worldwide

Exit

Following the successful turnaround of the Kotkamills business, a Finnish private equity firm, MB Funds acquired the business from OpenGate.

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