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PaperlinX Sells U.S. and Italian Operations


July 10, 2012
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Amid the continuing restructuring of its operations, Australia-based PaperlinX Limited has completed the sale of its operations in the United States and Italy.

PaperlinX’ U.S. operations, listed as Spicers Paper Inc. and Kelly Paper Company, are being purchased by Central National-Gottesman (CNG) for US$76 million, while the company’s Italian entity was officially purchased by Lecta for €45 million.

Spicers Paper Inc., headquartered in Santa Fe Springs, California, is a significant U.S. paper distributor with 12 warehouse locations in the West and Midwest. Kelly Paper, headquartered in City of Industry, California, operates a chain of paper stores with 48 locations across four Western states. Combined sales for both companies were approximately US$500 million in the most-recent fiscal year.

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“Spicers and Kelly are well-managed and respected businesses, and we are thrilled to have the opportunity to acquire them,” said Ken Wallach, Chairman and Chief Executive Officer of Central National-Gottesman Inc. “The existing management and staff of Spicers and Kelly have done an outstanding job. These are excellent businesses and we intend to operate both of them as they are, and under their existing brands.”

The Spicers and Kelly locations will sit alongside CNG’s 22 Lindenmeyr Munroe paper distribution facilities and stores, located on the East Coast and in the Midwest. This transaction is CNG’s fifth acquisition of a paper merchant in the past three years, including four in the U.S. and one overseas.

In addition to the sale of its U.S. and Italian operations, PaperlinX on June 26 announced a series of restructuring measures and expected results, including:

• PaperlinX is implementing an internal loan restructure which will reduce future FX risk and allow the close-out of an in-the-money currency option to realize cash of A$39 million;

• European restructuring has been accelerated and expanded in scope, with ongoing expected benefits of A$68 million by the end of FY14 and total costs expected to be A$43 million;

• Proceeds from asset sales and close-out of the currency option to be used to reduce debt, fund restructuring, provide liquidity and enable refinancing;

• PaperlinX SPS will Step-Up on the 30 June 2012 Remarketing Date; no distribution will be paid on the 30 June 2012; and

• PaperlinX expects to report a loss in continuing operations before restructuring costs of approximately A$38 million and a total reported loss after tax of A$171 million, after taking into account restructuring, impairments, a currency option benefit and losses booked on the sale of Italy and the U.S.


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