UPM-Kymmene buys German Haindl

May 29, 2001
Web Posted at 0814 GMT

By John Acher

HELSINKI, (Reuters) - The world's third biggest papermaker UPM-Kymmene said on Tuesday it would buy privately held German magazine paper maker Haindl'sche Papierfabriken KGaA for cash and stock worth 3.64 billion euros ($3.13 billion).

“The acquisition further enhances UPM-Kymmene's position as the leading global producer of magazine papers,” the Finnish company said in a statement. “Furthermore, the position in newsprint in Europe strengthens considerably.

At the same time UPM-Kymmene said it would sell two Haindl mills, one in Germany and one in The Netherlands, to Norwegian papermaker Norske Skog for 1.1 billion euros.

Norske Skog would financed this through an equity offering of about 3.2 billion crowns, by cash and debt. The move was part of the Norwegian company's bid to expand in publication paper.

“Accordingly the (after-tax) net cash consideration of the Haindl acquisition for UPM-Kymmene will be 2.2 billion euros ($1.89 billion),” UPM-Kymmene said in a statement.

UPM-Kymmene said it would assume debt of 210 million euros, raising the total enterprise value of the acquisition to 3.85 billion euros.

As part of the deal, the Finnish company said it would propose issuing 12.3 million new UPM-Kymmene shares to certain Haindl owners. It said it had the backing of Haindl's principal shareholders.

UPM-Kymmene said it would finance the purchase with the directed share issue, cash flow and sale of non-core assets, and the acquisition would be immediately accretive to cash earnings per share and EPS accretive in 2003.

“The combination of acquired assets of Haindl and UPM-Kymmene is expected to lead to annual synergies of approximately 70 million euros, fully materialised at the end of 2003,” UPM-Kymmene said.

UPM-Kymmene said it would get four mills in Germany and Austria with production capacity of 1.9 million tonnes of magazine paper and newsprint, raising its total capacity to 11.6 million tonnes.

UPM-Kymmene said that an annual goodwill charge of about 110 million euros would be amortised over 20 years.

UPM's share dipped slightly to 36.55 euros at the open on a firm Helsinki bourse, with some brokers saying the market remained cautious ahead of a news conference set for 0800 GMT.

The stock is off a year-high 38.50 euros set two weeks ago, and well below peaks of over 44 euros set in early 2000.

GOOD INDUSTRIAL SENSE IN CONSOLIDATING SECTOR

The move by UPM-Kymmene was not entirely unexpected after the company, which aims to remain one of the world's leading forest products makers, lost out last year in a bidding battle with International Paper for Champion International.

“This looks positive for the industry and positive for UPM-Kymmene in particular,” said analyst Torbjorn Thuvesson at Carnegie in Stockholm.

“Haindl is viewed as one of the top-quality producers with high margins,” he said. “The price looks okay too -- it's below many other (recent) deals in terms of price per tonne, and these are quality assets.

A Helsinki fund manager echoed the view on the deal's industrial logic, but said the price was not necessarily low.

“In the long term this looks to be precisely in line with UPM's strategy. In the short term, the price is a little bit of a question mark,” the fund manager said. “By traditional measures this can not be considered cheap.

UPM-Kymmene said it was advised by Merrill Lynch.