Record High-Yield Issue Planned for Kappa Packaging

The largest private equity transaction to date this year was announced in mid-May, when Cinven and CVC Capital Partners agreed to acquire the packaging division of KNP of the Netherlands in a DFl 3.4 billion (ecu 1.5 billion) deal set to complete in July. As much as 80% of the acquisition consideration will be met by debt funding in a highly leveraged structure that reportedly will include the largest high-yield bond issue in a European currency to date. Barclays Capital is arranging the debt package; the exact size of the high-yield issue has not yet been disclosed, but it is expected to exceed the GBP300 million (ecu 447 million) raised earlier this year by NTL.

The business, renamed Kappa Packaging, employs 8,200 people and is Europe’s third largest manufacturer of fibre-based board packaging. Last year, it recorded operating profits of DFl 252 million on sales of DFl 2.8 billion. The institutional equity component is split 50:50 between Cinven and CVC, which beat both financial and trade competitors, including Candover, Investcorp, Metsa-Serla and David S. Smith, to the KNP prize. The 13.5 multiple of 1997 operating profits represented by the Cinven/CVC bid was described by KNP’s chairman as a record for the packaging industry.

The new owners and the management team, headed by Frits Beurskens, intend to expand Kappa through acquisitions in the European packaging sector before seeking a flotation within three to five years.