Baker McKenzie advises on $1.72bn sale of packaging business

The complex deal was finalised while the legal team was working remotely

Baker McKenzie advises on $1.72bn sale of packaging business

Baker McKenzie has advised on the sale of packaging business Australasian Fibre Business by Orora Limited for an enterprise value of $1.72bn.

ASX-listed Orora announced on 30 April that a wholly owned subsidiary of Nippon Paper Industries Co., Limited will take charge of Australasian Fibre Business. Nippon Paper is one of the biggest forest, paper and packaging companies in the world.

“This was a significant deal for Orora and certainly, in terms of size and scope, the biggest since listing on the ASX in 2013. Orora’s board determined that the offer of $1.72bn from Nippon Paper Industries was compelling and represented full value of the business that had reached maturity under Orora’s ownership,” Jason Arnheim, Orora’s senior in-house counsel, said in a statement to Australasian Lawyer.

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Orora reaps net profits of around $1.55bn after tax and costs, and retains a number of businesses, including its market-leading Australasian Beverage business.

“The sale of the Australasian Fibre Business provides an important opportunity for Orora to assess and shape the strategic path ahead for the company,” said Brian Lowe, managing director and CEO of Orora, in the company’s statement to the ASX. “Looking ahead, Orora has commenced a review of the strategy for the continuing businesses, including assessing competitive advantage in key market segments and identifying growth options to leverage our existing core strengths.”

Baker McKenzie’s lead counsel on the deal, Peter Ickeringill, told Australasian Lawyer that the process of closing the deal under the current climate.

“I particularly lent my expertise to the negotiation of environmental warranties and indemnities, which in a business like this are always a key focus, the negotiation of material adverse change (MAC) and W&I insurance conditions, the process for separation of the business sold from the business retained—given that the transaction was an asset deal and not a share deal—and the process for communication with thousands of transferring employees and hundreds of key customers and suppliers,” he said.

During the negotiation, the parties worked to limit the effect of the COVID-19 pandemic on the execution of the sale.

“Orora was very clear at the time of negotiating the sale agreement that there was not to be a broad-based MAC clause, but only a very business-specific MAC,” Ickeringill said. “As far as we know, many other deals that have failed to complete since the onset of COVID-19 have come unstuck due to MAC or force majeure clauses. With that not being an issue in this deal, the parties dealt cooperatively with the practical issues of COVID-19 that may impact on getting to completion and overcame them all.”

He also cited the firm’s close working relationship with Arnheim as a factor in the sale pushing through.

“The benefit of a senior in-house counsel who is commercial in outlook and who knows the business backwards can never be underestimated,” Ickeringill said. “[Arnheim’s] ability to obtain and give instructions and resolve key issues, all while working remotely from home, meant that Baker McKenzie was able to rely on him and use him as the first port of call for everything.”

With movements restricted as a result of the pandemic, the legal teams relied on constant communication to finalise the sale.

“Weekly written updates and senior leadership calls were instigated to keep the business up to date on the transaction,” Arnheim said. “It is still amazing to think that a transaction of this size and complexity completed with all legal team members working from home—however, from a client perspective, it ran as close to normal as possible.”

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