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SCA To Split Into Two Companies in Second Half Of 2017

Published on Aug 24 2016 10:13 AM in A-Brands tagged: Featured Post / SCA / Velvet / Plenty / Tissue

SCA To Split Into Two Companies in Second Half Of 2017

Svenska Cellulosa AB will seek shareholder approval to split its hygiene and forestry products units into two listed companies, a move the Swedish maker of Velvet tissues and Cushelle toilet paper says will facilitate growth and better highlight the value of the respective businesses.

SCA gets about 85 percent of group sales from its tissue and personal care operations and the rest from the forest products unit, the company said in a statement on Wednesday. It’s proposing a plan through which shareholders will receive shares in a new hygiene company to be based in Stockholm, while the forest-products business will keep the SCA name and its current registration. The shares gained as much as 12 percent.

“After a thorough analysis, our conclusion is that a split of SCA into two listed companies is the best way to continue to create shareholder value, customer benefits and further development opportunities,” Chief Executive Officer Magnus Groth said in the statement. SCA, Europe’s largest private forest owner, will put together a proposal in time for a shareholder vote at the annual general meeting next year and will seek to complete the split by the end of next year.

While the idea of a split has been raised in the past, it was repeatedly dismissed by former CEO Jan Johansson, who said he was unconvinced of the potential benefits in separating the hygiene business from SCA’s forest lands, paper and pulp mills. His ouster, along with the departure of SCA veteran chairman Sverker Martin-Loef, paved the way for change. Groth, who became CEO in March 2015, announced five months later that the company would be separated into separate hygiene and forest units, raising investor hopes for the prospects of a split.

Norwegian sovereign wealth fund Norges Bank Investment Management, which controls shares representing 8.7 percent of SCA’s voting rights, intends to support the proposal, it said in a statement.

SCA stock traded 12 percent higher at 279.90 kronor as of 9:04 a.m. in the Swedish capital.

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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