Reno de Medici S.p.A.

views updated

Reno de Medici S.p.A.

Via Tucidide, 56 Torre 6
20121 Milan
Italy
Telephone: (+ 39)297 960 441
Fax: (+ 39)275 288 555
Web site: http://www.renodemedici.it

Public Company
Incorporated: 1967 as Cartiera del Reno SpA
Employees: 2,259
Sales: EUR 525 million ($490 million)(2000)
Stock Exchanges: Milan Madrid
Ticker Symbol: RDM.MI; RDM.MC
NAIC: 32221 Paperboard Container Manufacturing; 32212 Paperboard Mills; 32213 Paperboard Mills

Milan-based Reno de Medici S.p.A. is the leading manufacturer of recycled cardboard and foldable cartonboard in Italy and Spain and the second largest after potential merger partner Meyr Melnhof Karton of Austria. The company’s main products include boxes for the packaging industry and greeting cards, a segment in which the company is one of the European market’s top producers. Reno de Medici also owns a majority stake in energy production facility Cogeneracion Prat SA, located near its El Prat de Llobregat (close to Barcelona) production plant. Cogeneracion provides energy at reduced cost to Reno de Medici and the company also sells back excess energy production on the open market. Reno de Medici is active as well in the production of matches and related products, including sulfur. Cardboard production remains the company’s central activity, however, accounting for more than 90 percent of the group’s total sales. The company markets a wide range of paper and cardboard products under three core brand names: RDM, Ovaro, and Sarrio. The later brands come as a result of a number of major acquisitions, most notably that of Spain’s Sarrio and its Italian subsidiary Saffa beginning in 1997. Reno de Medici operates six production plants in Italy and two more in Spain, selling more than 800,000 tons in the year 2000. Traded on both the Milan and Madrid stock exchanges, Reno de Medici posted EUR 525 million in sales in 2000. The company is headed by founder Giovanni Dell’Aria Burani who, together with his family, remains Reno de Medici’s primary stockholder.

Founding a Carton Producer in the 1960s

Reno de Medici was founded as Cartiera del Reno SpA in 1967, with headquarters in Milan and a production facility in the Bologna-region town of Marzabotto. Already specialized in the production of cardboard, the company’s initial output was just 8,000 tons. Founder Giovanni Dell’Aria Burani was to lead the company from these modest beginnings to becoming one of Europe’s primary cardboard and foldable cartonboard products manufacturers in only 30 years.

Cartiera del Reno SpA prospered enough to begin adding capacity in the mid-1970s. The company added a new paper producing unit in 1975, boosting its total production output past 50,000 tons. Italy’s papermaking industry remained highly fragmented throughout this period, with top paper producers accounting for only 60 percent of total national production. The remaining producers, like Cartiera del Reno, were primarily small-scale, family-owned enterprises.

Italy’s lack of natural resources—such as a lack of forests—acted as a barrier to full development of the paper producing industry. Nonetheless, there were several niches available, such as the production of high-quality tissue-based writing papers, offering better growth prospects. Another niche was that of cardboard and foldable paper board manufactured from recycled materials—a more available resource in wood pulp-poor Italy. Giovanni Dell’Aria Burani steered his company toward this niche. While developing other products, such as matches, Burani’s company’s success was to come from its focus on the recycled cardboard market.

Growth in the 1980s

A series of acquisitions helped Burani boost his company’s production to capture a leading share of cardboard production. The first of these came in 1985, when the company acquired Ovaro SpA, and that company’s Ovaro-branded product range. Ovaro added some 32,000 tons of production output per year. One year later, Cariera del Reno acquired the cardboard production division, including a 60,000-ton annual output capacity plant in Turin, from Cartiera Binda de Medici. Burani then changed his company’s name to reflect the new scope of operations to Reno de Medici SpA.

Throughout the rest of the 1980s, Reno de Medici continuously updated its production facilities, adding not only state-of-the-art equipment but also stepping up the company’s total output. The company returned to acquisitions in 1992, buying a strong shareholding position in Grafiche Capretta SpA. Reno de Medici later raised its position in Grafiche Capretta almost to full control, to 70 percent in 1995 and then to 91 percent in the Europoligrafico SpA subsidiary created through the 1999 merger of Bianchi Saffapack and Grafiche Capretta.

By the early 1990s, Reno de Medici’s output had risen to 240,000 tons. The company credited its strong output levels and its commitment to continued modernization of its production park for enabling it to weather the deep recession of the 1990s and particularly the near-collapse of paper prices in 1993. Reno de Medici managed to maintain its profitability during this difficult period, posting a net income of L 0.4 billion on total sales of L 208 billion in 1994. A year later, the company’s revenues had risen to L 284 billion, with profits jumping to L 6.6 billion.

By the mid-1990s Reno de Medici began to prepare for a public offering that would enable it to step up its capital investments and look for new acquisitions in an industry that remained somewhat stubborn and resistant to consolidation. In 1995, the company formally brought Ovaro SpA into Reno de Medici’s operation, merging the two companies’ activities. Reno de Medici maintained Ovaro’s strong brand-name and product list, alongside its own RDM brand. The following year, Reno de Medici went public with a listing on the Milan stock exchange. Founder Burani and family maintained their majority control of the company.

Potential Merger Partners for the New Century

Reno de Medici’s public offering gave it the capital backing to begin an even more ambitious expansion. After having boosted its position in Grafiche Capretta to 70 percent, which added that company’s 15,000 tons of production capacity, the company looked for an even bigger partner with which to confront the growing consolidation of the European paper manufacturing industry and the buildup to the single-currency zone at the turn of the century. In 1997, Reno de Medici announced that it had agreed to merge with fellow Italian company Saffa SpA.

The merger brought a number of important new subsidiary operations, including Saffa’s majority control of paper transformation division Bianchi Saffapack SA, its match-making unit Italmatch, a real estate development arm, Saffa Immobiliare, and—not least—Saffa’s controlling share of Spanish cardboard manufacturer Sarrio S.A. The new company, however, retained the Reno de Medici name and remained under Burani family control.

Sarrio S.A. had, in fact, been created in 1990 when Saffa and Sarrio had agreed to combine their paperboard manufacturing operations under the Sarrio S.A. name, with Saffa retaining majority control of the newly enlarged Spanish company. The merger of Saffa and Reno de Medici created Italy’s largest and Europe’s second largest recycled cardboard manufacturer, behind Austria’s Meyr Melnhof, with combined sales of more than L 1,100 billion and production capacity of close to 800,000 tons.

Soon after its merger with Saffa, Reno de Medici acted to take full control of Sarrio as well, merging that company’s entire operation into its own, yet keeping the Sarrio brand name. The company also maintained a second listing on the Madrid stock exchange. Reno de Medici’s park of production facilities now included six sites in Italy, two plants in Spain, and a ninth plant in Slovenia. The expanded company now controlled annual output volumes of up to 950,000 tons.

In late 1998, Reno de Medici sold its Slovenian carton subsidiary to Meyr Melnhof. Following the sale, Reno de Medici acknowledged its interest in a potential merger with its Austrian counterpart—with the creation of the world’s largest manufacturer of greeting cards and one of the global leaders in recycled foldable carton as a result. In the meantime, Reno de Medici began reorganizing its own growing operations. The company announced that it was selling off its real estate subsidiary in 2000. Later that year the company reached a cooperation agreement with Spain’s Barneda 2000 SL to form the 50-50 joint venture Barneda Carton SA, taking over Barneda’s carton production while retaining the Barneda brand name. The company reached a separate agreement with ABB of Sweden to form the full-service joint venture ABB RDM Service, a company expected to reach sales of some L 35 billion.

Company Perspectives:

The corporate purpose shall be: a) to perform industrial, commercial and service activities, in Italy and overseas, relative to, instrumental for or connected with the following sectors: paper-making and paper-transformation, including any and all complementary and intermediate production processes; chemicals in general and match-making, including any and all complementary and intermediate production processes; farming, forestry, zootechnics, transformation of relative products and foodstuffs; b) real estate, including leasing; c) acquisition of equity holdings in firms, companies, organisations, consortia and associations in Italy and overseas, the funding and technical and financial coordination thereof, the trading, exchange, possession, management and placement of public and private securities.

After acquiring remaining control of Bianchi Saffapack from France’s La Rochette, Reno de Medici created the Europoligrafico SpA subsidiary through the combination of Bianchi Saffapack and Grafiche Capretta in 1999. The new subsidiary, with four production units and 60,000 tons in annual output, became Italy’s top paper transformation company. In that year, the company announced its intention to boost its production capacity in Spain by some 50 percent with the addition of a new coated cardboard machine at its El Prat de Llobregat factory. That expansion prompted the company to increase its shareholding in nearby power generation facility Cogeneracion Prat SA in February 2001, ensuring itself at reduced cost energy and additional revenues from sales of excess energy on the open market.

Reno de Medici headed into the new century with continued revenue gains, as it annual sales topped EUR 525 million in 2000. In barely more than 30 years the company had succeeded in imposing itself as a leader not only in the Italian market but across the European market as well. Nonetheless, as analysts criticized the European papermaking company for the slow speed of what was viewed as an inevitable and necessary consolidation, Reno de Medici began to look more closely at the possibility of uniting with Austrian counterpart Meyr Melnhof.

Principal Subsidiaries

Beobarna S.A. (Spain); Berneda Carton SA (Spain; 50%); Ceres Prat S.A. (Spain); Cogeneration Prat S.A. (Spain); Emmaus Pack S.r.l. (51.39%); Europoligrafico S.p.A. (91.05%); RDM RE S.A. (Luxembourg; 99.99%); Red. IM S.r.l.; Reno De Medici International S.A. (Luxembourg; 99.99%); Saffapack Sud S.r.l; Saffafrance SARL. (France; 99.58%); Sarriò GmbH (Germany); VALLI MARINE & GENERAL S.r.l.

Principal Competitors

Amcor Limited; International Paper Company; Meyr Melnhof Karton AG; Stora Enso Oyj; Svenska Cellulosa Aktiebolaget SCA; UPM-Kymmene Corporation; Van Gennecten Biermans

N.V.

Key Dates:

1967:: Giovanni Dell’Aria Burani founds Cartiera del Reno SpA.
1975:: The company adds second paper machine.
1985:: The company acquires Ovaro SpA.
1986:: The company acquires de Medici carton division; changes name to Reno de Medici.
1992:: The company acquires shareholding in Grafiche Capretta.
1995:: Ovaro is merged into Reno de Medici.
1996:: The company is listed on the Milan stock exchange.
1997:: The company merges with Saffa SpA.
1998:: The company merges with Sarriò SA.
1999:: Europoligrafico SpA is created.
2000:: Joint venture Barneda Carton SA is created.
2001:: The company acquires majority share of Cogeneracion Prat SA.