Sappi buys Finnish paper firm for R8.9bn

30 September 2008

South African multinational paper and pulp giant Sappi is to acquire the coated graphic paper business of M-real for €750-million (about US$1.1-billion or R8.9-billion), subject to a purchase price adjustment for net debt and working capital.

The transaction includes the acquisition of M-real’s coated graphic paper operations, its brands and technical expertise, as well as four coated graphic paper mills in Europe. These are situated at Kirkniemi and Kangas in Finland, Stockstadt in Germany and Biberist in Switzerland.

Two paper mills, situated in Sweden and Finland, will remain in the ownership of Finnish-based M-real, and continue as contract producers for Sappi under supply agreements.

“This acquisition will significantly strengthen Sappi’s market position in Europe and globally by combining M-real’s strong brands and assets with Sappi’s already powerful product offering,” Sappi CEO Ralph Boettger said in a statement this week.

“This transaction is in line with Sappi’s stated intention to improve profitability and returns, and to seek out opportunities that will add value to and grow Sappi’s business as a market leader in coated fine paper and chemical cellulose.”

Global expansion

Boettger said that the company had built its global footprint through the acquisition and integration of businesses in north America and Europe, and the acquisition provided an opportunity for the company to achieve its goal of becoming the most profitable company in the pulp, paper and chemical sectors in which it operates.

According to the statement, the acquisition will result in the following benefits for the company:

• • An enhancement of Sappi’s leading position in the coated fine paper sector in Europe and globally

• • An expansion of Sappi’s wood-free coated product offering and customer base, as well as the addition of the strong brands and significant market position of M-real’s magazine paper

• • An increase of Sappi’s European graphic paper production capacity from 2.6 million tons per annum to 4.5 million tons per annum

• • Significant synergies from the acquisition, which should result in savings of approximately €120-million over a three-year period, through maximising capacity utilisation and distribution, integration of sales and administration and rationalising manufacturing across the Sappi group

“We are excited about the transaction and the benefits it brings to Sappi, the industry, as well as to our existing and new customers,” said Boettger. “The products and brands which have been acquired are an excellent complement to our strong market offering, enabling us to offer our existing, as well as new customers in Europe, north America and globally, a broader range of products coupled with excellent customer service.”

The transaction has received the support of Allan Gray and RMB Asset Managers, who manage some 34% of Sappi’s shareholding, and the deal now only awaits regulatory approval from competition authorities in the US and Europe.

SAinfo reporter