SCA Chief Plans to Separate Assets in Two Standalone Units

Svenska Cellulosa AB, Europe’s largest private forest owner, will create two divisions, one for forest products and another for consumer products, in a move that could foreshadow a breakup of the company.

The Swedish company’s swathes of woodlands will be combined with paper, pulp and sawn-timber operations to better highlight the value of the operation, while tissue and personal-care products will form a separate entity, the Stockholm-based company said in a statement on Friday. SCA shares climbed as much as 6.2 percent.

“This announcement splits SCA clearly into two parts,” Exane BNP Paribas analyst James Wyatt said in a note. “Could part of the motivation here be to ready the company for a split? The answer is unclear, but will certainly be something for the bulls to latch onto today.”
The Swedish company generates 85 percent of sales from tissue and personal-care products like incontinence pads and diapers. Asked whether the measures are a prelude to exiting forest operations, Chief Executive Officer Magnus Groth said on a call that the company hasn’t made any further decisions.

The separation will take until the end of next year, partly due to the legal work required to make the forest-products division a subsidiary, according to Groth, five months into his role after replacing Jan Johansson, who was ousted following controversies about alleged misuse of corporate jets.

“This is a journey that we have started now, to make this separation of the assets,” the CEO said.

SCA has earmarked 7.8 billion kronor ($922 million) in investment to double production capacity of pulp over the next three years at a mill in Sweden.

The stock traded 10.30 kronor higher at 244.2 kronor as of 9:53 a.m., an advance of 4.4 percent.