With the acquisition of Arjowiggins Hkk3 Limited, 1.3 million euros in sales, The Fedrigoni Group becomes the owner of Arjowiggins China and the Quzhou paper mill, a world leader in the production of translucent papers sold under the Gateway and Sylvicta brands. In this way Fedrigoni Special Papers, the business unit specializing in high-end specialty papers, takes another step of growth. We talk about it with Marco Nespolo, managing director of Fedrigoni.
After entering into an industrial partnership with Arjowiggins HKK3 Limited a year ago, Fedrigoni took over its entire share capital in late 2023. Included in the deal is full control of Arjowiggins China, allowing the Veneto-based group to acquire its first Chinese plant, the Quzhou paper mill, and gain a considerable foothold in the Asian market. The mill, located in Zhejiang province, is not just any mill: it employs 130 workers and produces about 7 thousand tons of translucent papers for applications ranging from advertising to industrial design, from luxury to food packaging.
It is a true reference player in this segment, which makes the acquisition by Fedrigoni particularly significant. In fact, the Italian manufacturer not only strengthens its presence in Asia, where moreover it already has an extensive distribution network in China, Hong Kong, the Philippines, Indonesia and Bangladesh, including eleven warehouses, a production plant for self-adhesive materials and one for inserts and RFID tags in Guangzhou, but also expands its product portfolio in the market for translucent papers, which are now held in high regard by corporate customers because they have the potential to increasingly replace plastic in packaging as a 100% recyclable monomaterial.
Papers, that is, once used for architectural design and now finding wide use in food and non-food packaging and which, for the same strength, water repellency and hygiene, are enormously more sustainable than plastic.
Riding the transition from plastic to paper
“The acquisition of Arjowiggins China,” Marco Nespolo, Fedrigoni’s CEO, explains to Paper Industry World, “is strategic in order to respond to the need increasingly felt by the global luxury industry, not only in the Asian world, to have available high-performance solutions to replace plastic with papers with the same characteristics, but obviously much less impactful for the environment, the so-called plastic-to-paper, which is now required in many applications. Having enriched our offer with translucent papers produced by the Quzhou paper mill, which specializes precisely in this segment, allows us to be excellently positioned. Moreover, the luxury packaging market in China is very large: in fact, a lot of the packaging we see in Europe is made by Chinese manufacturing companies. This acquisition allows Fedrigoni to get in touch with Chinese converters that export to the global market and, at the same time, to work with companies that produce for the local market.”
Food packaging and cosmetic packaging: a rapidly developing area
“Thanks to the acquisition of the Quzhou paper mill and the production of increasingly high-performance translucent papers,” continues Nespolo, “we will be able to give a strong boost to our positioning in luxury packaging and, specifically, in premium packaging for food and beverage, as well as reinforce the plastic-to-paper transition that has seen us playing a leading role for some years now. Sylvicta, the most relevant product in the translucent range, has technical features that allow it to be used perfectly as a substitute for plastic in food packaging, cosmetics and more generally in luxury packaging: these are very strong high barrier materials, completely transparent, anti-grease, that do not allow oxygen to penetrate and that preserve aroma. This kind of technology allows our customers to replace plastic while preserving its performance and at the same time be increasingly sustainable: our papers are in fact recyclable, compostable and biodegradable. The impact will also be strong on the end consumer who will see a change in the packaging of products on the shelf.”
The importance of being among the first movers
“Moreover,” Nespolo adds, “our most direct competitors in this area are not many, because it is still a niche market. Certainly, its potential for development is very large. However, it must be said that creating materials of this type and with this technology involves considerable investment and research. In the Chinese market, the most relevant competitor is Minfeng Special Paper, a company with just over 1,000 employees, while in Europe it is Reflex Paper, a German company that, among other products, offers translucent materials for the food market.”
Continued push on innovation
“Specifically,” the manager explains, “innovating in the specialty papers sector means looking for more and more cutting-edge solutions capable of combining performance, aesthetics, and environmental concern: in fact, we have been doing research for more than 20 years to reduce the environmental impact of our supply chain while elevating the creativity of brands, designers, printers, and converters. These are advanced technologies to develop specific designs, products and applications that can support customers in the ecological transition. Some examples? RFID sensors for smart papers and not just labels; the introduction of papers that are truly alternatives to plastic (tear-proof, grease-proof, waterproof, transparent) made from renewable fibers or recyclable raw materials, such as cellulose thermoforms; or Replay, a project in which glassine, the siliconized backing that is separated and discarded at the application stage of self-adhesive labels, for the first time becomes the noble part, the decorative label that characterizes the product.”
More M&As on the horizon?
“In recent years we have been very proactive and have grown by external lines. Certainly, growth by acquisitions continues to be one of our goals, especially in high-growth areas such as RFID solutions for “smart” cards and labels, which many of our customers are looking at closely, special-purpose papers, and innovative labelstock. In particular, we are interested in expanding in North America and Asia-Pacific, and the financial operations we are conducting, from the sale of industrial real estate to the issuance of new bonds, also serve to free up liquidity for further M&A transactions (see box).” “Then,” Nespolo concludes, “with regard to the possibility of a stock market exit of the Group, on which I had expressed a positive opinion in the past, I can only say that it still remains an interesting option but not in the immediate term, also because a second investment fund, BC Partners, has just entered the company’s capital (at the end of 2022) alongside Bain Capital. Certainly in the next five years it is a possibility that we will evaluate.”
BOX BOX BOX
Fedrigoni acquires some assets of U.S. company Mohawk
The transaction, sixteen months into the industrial partnership between the two companies, is the third M&A in 2024. The Group is now able to produce and distribute a wide range of Fedrigoni’s high value-added papers directly in North America and expand access to Mohawkspecialty papers internationally. The transaction was finalized through a NewCo formed by Fedrigoni to acquire Mohawk’s assets in a sale process initiated by a financial institution, following a period of significant financial distress affecting the U.S. company in recent months. The transaction freed the new company entirely from existing debt, allowing it to preserve most of its jobs, industrial operations and customer relationships. Founded in 1931, Mohawk is a family-owned company that produces some of the best-known specialty papers for designers, brands, and printers and, just like Fedrigoni, has strongly innovated in the fields of digital printing and sustainability. Sharing core values such as solid know-how and a focus on innovation and reducing environmental impact led to the acquisition of this company, which becomes part of the Fedrigoni Special Papers division and represents an important piece in the Group’s growth strategy abroad.