Finnish pulp and paper manufacturer Stora Enso has signed an agreement to establish a joint venture (JV), Bulleh Shah Packaging with Pakistan-based Packages for $108m. The JV will include the operations of the Packages-owned Kasur mill and Karachi plant.
According to Stora Enso, the total consideration for the JV can be up to $125m including an additional maximum performance compensation based on the financial results of the second half of 2012 and the first half of 2013.
Initially, the company will hold 35% with a commitment to increase the shareholding at the agreed value to 50% at a later stage. The JV will provide packaging products to key local and international customers in the fast-growing Pakistani market and its sales are expected to be $130m in 2012.
In a bid to develop the business further, both parties are committed to a substantial $135m investment program during 2013 and 2014, as part of the agreement.
Stora Enso Renewable Packaging Business Area executive vice president Mats Nordlander said the agreement is an example of the company’s investments in creating growth markets.
"The Pakistani market, with growing demand for packaging products and paperboard, offers an attractive growth opportunity for us and the joint venture will enable us to increase our capability to serve our key customers," Nordlander said.
The JV transaction is subject to competition and regulatory approval and other customary transaction conditions and is expected to be completed during the first quarter of 2013.