Sappi Limited, the leading producer of coated fine paper and chemical cellulose, announced that it had completed the acquisition of the coated graphic paper business of M- real, a Finnish board and paper manufacturer, for Euro 750 million ($1.1 billion), subject to purchase price adjustments for net debt and working capital. M-real’s coated graphic paper business (other than in respect of M-real’s South African business), including brands and know-how, as well as four coated graphic paper mills – at Kirkniemi and Kangas in Finland, Stockstadt in Germany and Biberist in Switzerland have now become part of the Sappi Fine Paper Europe operations. M-real’s Husum PM8 Mill in Sweden and Äänekoski PM2 Mill in Finland are, as of 01 January 2009, contract producers for Sappi under supply agreements. Long term supply agreements for wood, pulp and other services have also taken effect.
The acquisition was financed through a combination of equity, assumed debt, the cash proceeds from a fully subscribed rights offering and a vendor note. All conditions precedent, including clearance from relevant competition authorities, have been met. The main benefits of the acquisition include:
• Enhancement of Sappi’s position in the coated fine paper sector in Europe and globally.
• Expansion of Sappi’s woodfree coated product offering and customer base, as well as the addition of the strong brands and market strength of M-real’s magazine paper.
• Increase of Sappi’s European graphic paper capacity from 2.6 million tons/annum to 4.5mn.
• Expected realisation of significant synergies.Weestimate total annual synergies of approximately $120 million which should be realisable in full within three years and without material capital investments.
“Sappi is now even better positioned to serve the European and global markets with a comprehensive range of leading products and brands, an expanded sales force, increased capacity and the benefits of scale, allowing Sappi to use its global strength to be the local supplier of choice to each and every customer.
“The transaction brings exciting benefits to Sappi as well as to our existing and new customers. For Sappi this will mean increased profitability, resulting in better returns and improved cash flows for the group. For customers it means a broader range of products coupled with excellent customer service.