Containerboard Industry Perspective
2nd Quarter 2014
Caraustar to acquire Newark Group
By Jesse Marzouk
The second quarter of
2014 was characterized by
little movement in prices in
either the containerboard or
paperboard markets. Containerboard prices largely
held, although some weakness continued in recycled
grades as the full impact of
nearly 1 million tons of additional recycled containerboard
capacity added over the last
year is being felt. On the paperboard side, uncoated recycled
board (URB) pricing inched up
$10 per ton and is up approximately $35 per ton over the last
year
In industry news, Caraustar
is proposing to buy Newark
Group, which would create the
second largest URB producer in
North America with approximately 33% market share. The
largest player is Sonoco Products Company, who controls
approximately 35% of industry
capacity. The proposed acquisition of Newark by Caraustar
would create an industry with
nearly 70% of capacity controlled by two firms.
Given the Department of
Justice’s (DOJ) recent decision
to strike down the acquisition of
Ainsworth Engineered by Louisiana Pacific (LP) in the oriented
strand board (OSB) market,
does a similar fate await the
Caraustar/Newark deal? The
DOJ cited the likelihood of price
increases in the OSB market as
a reason for not allowing the LP/
Ainsworth combination. Price
increases for URB would likely
follow the combination of
Caraustar and Newark.
The LP/Ainsworth combination would have created a firm
with a 32% market share in
OSB, but there would have
been no other single large player like Sonoco. The OSB market still would have been less concentrated with more firms
controlling more idled capacity
than URB. Or does the DOJ
give approval of the Caraustar/
Newark combination because of
the general lack of demand in
the URB market? Did the DOJ
face any political pressure to not
allow the LP/Ainsworth merger
because it is in the still relatively “fragile” housing industry and
is more visible to consumers?
These questions are expected
to be answered over the next
few months as the DOJ makes
its decision on the Caraustar/
Newark merger in the URB
space and the Verso/NewPage
merger in the coated paper
market industry.
Jesse Marzouk is a vice president and forestry products specialist. He has
appraised numerous U.S. and Canadian pulp, paper, and lumber-related companies
involved in manufacturing and distribution. Jesse received his MBA in finance from
Kellogg School of Management at Northwestern University, and has a degree in
finance and accounting from Indiana University.