NEWS RELEASE
Apr 25, 2012
R&I View: Nippon Paper Group To Merge with Nippon Paper Industries
No rating impact
Nippon Paper Group, Inc. (Sec. Code: 3893, Issuer Rating: A-) announced on April 25 that it will
merge with its wholly owned subsidiary Nippon Paper Industries Co., Ltd., with Nippon Paper
Industries being the surviving company, effective April 1, 2013. Prior to the merger, three group
companies including Nippon Paper Group's wholly owned subsidiary Nippon Daishowa Paperboard
Co., Ltd. will be merged into Nippon Paper Industries as of October 1, 2012. The group will be
reorganized into one body with Nippon Paper Industries, Nippon Paper Group's core subsidiary
responsible for the mainstay paper business, at the center of the group's operations.
The planned reorganization of the group aims to enable speedy allocation of management
resources and thereby enhance the capacity to respond to changes in the business environment, as
well as eliminate duplications in business fields, customers and products among operating companies.
Under the new structure, the group will seek to expand its earnings base by developing growth areas
such as package materials, paper cartons and biochemicals into its core businesses along with the
paper business.
The rating for Nippon Paper Group has been reflecting the creditworthiness of the entire group.
As the companies subject to the reorganization are wholly owned by the holding company or Nippon
Paper Industries, the reorganization will have only an extremely small impact on the group's
revenue/expenditure and financial position. Therefore, neither the creditworthiness of the entire group
nor the rating for Nippon Paper Group will be affected by the merger. The obligations under the bonds
issued by Nippon Paper Group are expected to be taken over by Nippon Paper Industries, the
guarantor of the bonds, and this will not be detrimental to the bondholders.
The environment surrounding the group's mainstay paper business remains challenging due
partly to a decline in the paper market caused by deterioration in the supply-demand balance
stemming from the prevalence of digital media and an increase in paper imports, as well as a rise in
raw material and fuel prices. R&I will pay close attention to whether the group is able to restore the
earning and cash flow generating capacities commensurate with the rating and improve its debt-equity
structure by accomplishing a paper business recovery plan through rebuilding of the Ishinomaki Mill in
Miyagi Prefecture, which was seriously damaged by the Great East Japan Earthquake.
Lead Rating Analyst: Kosuke Sato
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