They acquired the essence of a privately owned Mexican competitor to gain access to their production facility and ownership of their U.S. business/customers. See yellow below.
TIS, primarily services a mid western area within 900 miles of their north eastern headquarters and paper mill. This strategic acquisition expands it's market area all the way to the Pacific Ocean.
Once assimilated, TIS's forward looking revenue and EPS outlook should be updated upwards.
There's been a lot of M & A activity in 2014. This is the model Cisco used to grow so big; acquire other companies and is the same model my trucking company Celadon Group Inc and food company B & G Foods is using to provide value to shareholders.
Press Release: Orchids Paper Products Company Enters Strategic Alliance With Fabrica de Papel San Francisco, S.A. de C.V 5:10p ET May 5, 2014 (Dow Jones) PrintPress Release: Orchids Paper Products Company Enters Strategic Alliance With Fabrica de Papel San Francisco, S.A. de C.V Orchids Paper Products Company Enters Strategic Alliance With Fabrica de Papel San Francisco, S.A. de C.V PR Newswire PRYOR, Okla., May 5, 2014 PRYOR, Okla., May 5, 2014 /PRNewswire/ -- Orchids Paper Products Company ("Orchids") (NYSE MKT: TIS) today announced a strategic alliance with Fabrica de Papel San Francisco, S.A. de C.V. ("Fabrica") to support the growth of Orchids' U.S. west coast sales. Fabrica, which is based in Mexicali, Baja California, Mexico, is a recognized world-class, low cost manufacturer of high-quality tissue paper products. Orchids expects this alliance will allow Orchids to effectively and efficiently service customers in the western United States and support Orchids' vision to become a national supplier of high-quality consumer tissue products in the value, premium and ultra-premium tier markets. Fabrica is a privately owned business which started as a tissue converter in 1958 and has grown to 150,000 metric tons of capacity, one of the largest tissue manufacturers by capacity in Mexico. In 2013, Fabrica started up the world's first NTT paper machine. As part of this alliance, Orchids will acquire Fabrica's current U.S. business, including certain manufacturing assets and access to 18,000 metric tons of capacity each year to support the value, premium and ultra-premium requirements of the U.S. market, with an option to purchase an additional 7,000 metric tons in each of the first two years. Products will be produced at Fabrica's facility in Mexicali, Mexico and shipped directly to Orchids' U.S. customers. Operating margins on products produced under this agreement are expected to be consistent with margins earned on products produced in Orchids' facility in Oklahoma.
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