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Glatfelter Snaps Up Dresden Papier

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Specialty papers maker Glatfelter (GLT - Free Report) has cut a definitive deal to buy German specialty non-wovens maker Dresden Papier GmbH from Fortress Paper Ltd. for €160 million (around $209 million).

Dresden is a leading manufacturer of nonwoven wallpaper base materials. Nonwoven wallpapers are increasingly being adopted by wallpaper installers and design professionals in Europe given its superior performance and attributes such as dry strip-ability, higher tear resistance and no material shrinkage/expansion when wet. There is a compelling growth opportunity for these products in Asia.

The acquisition, which is subject to customary closing conditions, including German and Ukrainian regulatory clearances, is expected to consummate during second-quarter 2013. Following the buyout, Dresden will become part of Glatfelter’s Composite Fibers unit, which makes fiber-based products for growing global niche markets.

Glatfelter plans to fund the takeover with available cash and debt. It had cash of $98 million and $345 million available under its revolving credit facility at the end of 2012. Glatfelter sees the acquisition to be immediately accretive to its earnings per share by around 25 cents a share on an annualized basis.

The Dresden buyout will add an industry-leading nonwovens product line to Glatfelter’s Composite Fibers segment and will offer it operational leverage and growth opportunities globally.

Revenues from the Composite Fibers business slipped roughly 12% to $105.3 million in fourth-quarter 2012 as soft demand and difficult economic conditions in Europe led to a decline in shipping volumes. Notwithstanding the ongoing European economic challenges, Glatfelter envisions the global nonwoven wallpaper business to continue to grow at a compound annual growth rate of at least 10%.

Glatfelter, which competes with International Paper (IP - Free Report) among others, makes specialty papers and fiber-based engineered materials. Its offerings include security papers, book publishing papers, envelopes, converting papers, shopping bags, food and beverage paper, metallized products, composite laminates papers and feminine hygiene products.

Glatfelter is expects to benefit from its ongoing growth initiatives. The company anticipates shipping volume for its Specialty Papers unit in first-quarter 2013 to be in line with the fourth quarter level. For both Composite Fibers and Advanced Airlaid Materials businesses, Glatfelter expects shipping volumes to be 5% higher sequentially in the first quarter.

Glatfelter currently retains a short-term Zacks Rank #3 (Hold).

Other paper and paper products companies with favorable Zacks Rank are Resolute Forest Products Inc. Clearwater Paper Corporation (CLW - Free Report) . While Resolute Forest retains a Zacks Rank #1 (Strong Buy), Clearwater hold a Zacks Rank #2 (Buy).

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