19 February 2017 Business

Antalis to float as Sequana is hit by High Court ruling

Paper making and merchanting group Sequana is appealing a decision that it must pay BAT €138.4 million, and in the meantime has sought protective administration in France.

Antalis is preparing to join the Paris Bourse as parent company Sequana seeks the protection of administration as the best means of defence against a court ruling in London ten days ago.

The High Court of Justice overturned a previous decision and has ruled that Sequana must pay tobacco company BAT $138.4 million. Sequana disputes the decision and has been given leave to appeal. But in the meantime in order to protect its business, has sought and been granted a preventative administration order. This puts the business out of reach of BAT, at least for any the two-to-three-month period it says is necessary to reorganise.

The company has put is security papers division up for sale and has agreed a deal wth Oberthur Fiduciaire for the Dutch mill. The Arjowiggins Security mill at Jouy-sur-Marin which produces 8,000 tonnes a year of papers for banknotes, passports and the like, remains up for sale.

It is business as usual for the remainder of the Arjowiggins paper making business, as it is for Antalis. Sequana had already put in motion plans to float Antalis International on the French stockmarket and these are well advanced, says David Hunter, Antalis UK CEO. He explains that employees have been briefed on the impact of the share sales.

The flotation would allow Antalis to expand in the growing packaging and display print segments as well as providing the parent company with “the additional financial resources need to run its operations and face its obligations” according to a company statement.

Framing the process of an Antalis float is a complex task – it operates in 43 countries – and the lawyers “have been very very busy”, says Hunter. “When that process has run its course and has gone through the relevant authorities, the IPO will take place, hopefully in the next few months.”

Sequana says it hopes to complete the float of between 10-30% of the shares within the first half of 2017. Some shares may be distributed to Sequana shareholders as part of the dividend payment.

The legal action does not affect either Arjowiggins or Antalis with no liability passing to them It relates to whether the provisions of the Insolvency Act or those of the Companies Act apply regarding distribution of a dividend in May 2009 by former subsidiary Windward Prospects and how creditors’ protection applies.

BAT has through acquisitions taken control of Windward Prospects, which had traded as a producer of NCR papers as Arjo Wiggins Appleton. Authorities in the US have ruled that BAT must pay the costs of cleaning up the Lower Fox river in Wisconsin, and in turn BAT argues that Sequana had taken money in dividends that should be used to pay for the clean up task. The question the court has to decide is whether Sequana acted correctly. If so, BAT pays for the clean up; if not Sequana must pay, at least in part.

The court of appeal is expected to make its ruling with 12-18 months. In the meantime, the High Court has ruled that Sequana must make an interim payment of £5.8 million towards BAT's legal costs by 5 May. It plans to challenge this decision

Sequana has also produced pro forma trading figures for 2016 several weeks early to underline the strong financial position of the company. Sales in 2016 were 7% down at €2.9 billion (€3.2 billion) with Ebitda earnings down 1% at €105 million (€106 million).

Most sales came from Antalis contributing €2.5 billion where a good performance in packaging and visual communications offset the decline in volumes of printing papers. It also suffered a €109 million exchange rate deficit as the value of the pound dropped. Ebitda has been steady.

The declining order book for the security division hit sakes in Arjowiggins, down 11.7% at €668 million for 2016. Paper volumes have also dropped in line with expectations after its Wizernes mill was closed in 2015.

In the UK Antalis achieved a record year in 2015 and, says Hunter, “2016 will be another good year. In 2017 so far the market has been a bit tougher, but the bottom line is we are still a very profitable company.”

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Antalis will be traded in Paris

Antalis will be traded in Paris

Sequana will sell off some of the Antalis merchanting business, enabling the paper merchant to expand its business in packaging and visual communications. It is also reorganising under protective administration.

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