Mergers and acquisitions

: the case of Portucel and AMS

Abstract

In pulp and paper industry, growing by acquisition is very common due to production capacity constraints. Portucel Soporcel group is one of the biggest players within the Portuguese industry, known for having large forestry nurseries, and producing both pulp and office paper. However, with the declining demand of this kind of paper due to digitalization, Portucel needed to diversify its production. Therefore, Portucel decided to enter in the tissue paper market, by acquiring the most efficient manufacturer in the Iberian Peninsula: AMS-BR Star Paper. The goal wasn’t merely to be the owner of this factory, but to use their knowhow to replicate its business model in Portucel’s plants. This acquisition was announced in February 2015 and five months later was performed, with a purchase price of 80M, in which an unknown portion was meant to finance a project that was being undertaken at the time. This dissertation evaluates both companies and the synergies involved in the deal, in order to estimate the suitable purchase price and compare it to the real one. After valuing both companies with DCF-WACC and relative valuation methodology, it is concluded that AMS has an equity market value of 33M€ and that synergies amounts 63M€, thus the acquisition price recommended is 77M€, paid all-cash.

Date of Award	22 Jul 2016
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	António Borges de Assunção (Supervisor)