 VALPARAISO, Indiana (From The Australian Financial Review) -- Anthony Pratt calls it his "billion dollar hamburger". Aptly for the billionaire, the burger he refers to - a huge paper mill he opened on Friday in Valparaiso, Indiana - is the biggest bite Pratt has taken in the United States yet.
The mill, the biggest of its type in the world, will add more than $1 billion to the value of Pratt Industries, the cardboard-box manufacturing and recycling firm he owns in the United States, which complements the long-standing Visy business Pratt and his sisters Heloise Waislitz and Fiona Geminder have in Australia.
It is the biggest investment Pratt has made in the 25 years he has spent growing Pratt Industries in the United States, having started with a small single mill in Macon, Georgia, when he moved to the US in 1991.
Pratt arrives at the $1 billion valuation for his "hamburger" by applying a multiple of 12 times earnings to the $US80 million ($104 million) earnings before interest and tax a mill such as that operating at Valparaiso - which will make 500,000 tonnes of paper each year - generates annually, minus about $260 million in capital expenditure.
From there, under Pratt's hub-and-spoke model, the corrugated box factories, which are always situated nearby, make boxes from the paper manufactured at the mills; these are valued at $US30 million each. The sheet plants, typically 10 for each hub and spoke, that then take the boxes and make more specialized products such as cardboard display units: they're worth about $US15 million each.
"The hamburger is where you put it all together, instead of giving you all the ingredients piecemeal, and say, here is a simple way to explain how we create value. It [the hub-and-spoke model] all stacks up together," Pratt tells AFR Weekend.
"So for all of those reasons this is a tremendously efficient and wealth-creating [system]. That's our cookie-cutter. We have one mill in the north-east, south-east, one in the south-west and now this one in Valparaiso."
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