UPM has closed the deal to buy Myllykoski Oyj and Rhein Papier that will boost its use of recovered fibre from 3.2 to 4 million tonnes per year. This will make it the biggest user of recovered fibre in the world.
Myllykoski Oyj and Rhein Papier comprise seven publication paper mills across Germany, Finland and the US and have an annual paper production capacity of 2.8 million tonnes. The acquisition also includes Myllykoski Oyj’s 0.8% stake in the Finnish energy company Pohjolan Voima Oy.
The deal was announced last December but it was only in July that it was approved by the EU Commission. The enterprise value of the businesses acquired is around €900 million. UPM will report a one-off gain of approximately €40 million in the third quarter.
The acquisition is being financed by UPM issuing five million new UPM shares to the owners of Myllykoski Oyj and Rhein Papier and has drawn €800 million in long term debt.
UPM president and chief executive Jussi Pesonen said: “UPM has been very determined in implementing its long term strategy of being the cost leader in the European paper industry and the global leader in magazine papers.
“Consolidation and restructuring are the best way to make fundamental improvements in terms of cost efficiency and to create value in the paper business. Our position as a frontrunner in the industry enables us to make a step change in the profitability of our paper business.”
UPM believes the transaction will have an immediate positive impact on cash flow and a positive impact on earnings per share from 2012. It estimates that annual cost synergies could be in excess of €100 million but this will not be announced until mid September.
UPM paper business group president Jyrki Ovaska said: “UPM has strong confidence in the print industry and our target is to be a very competitive paper supplier. After the transaction, we will be better able to meet customers’ needs with an extended product portfolio and strong local presence, including also in North America.
“Paper is one of UPM’s core businesses and our target is to achieve undisputed cost leadership in Europe. We also want to grow in China and other emerging markets.”