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Sappi Acquires M-real's Coated Graphic Paper Business
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Johannesburg, South Africa, 31 December 2008 -- /PRNewswire/ -- Sappi Limited (NYSE: SPP - News), the leading producer of coated fine paper and chemical cellulose, announced today that it has completed the acquisition of the coated graphic paper business of M-real, a Finnish board and paper manufacturer, for EUR 750 million (USD 1.1 billion; ZAR 8.9 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, and 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 PM 8 mill in Sweden and Aanekoski PM 2 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 also have 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 the relevant competition authorities, have been met.

The main benefits of the acquisition include the following:
  • 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, and 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/year to 4.5 million tons/year.
  • Expected realization of significant synergies, estimated to approximately EUR 120 million annually, which should be realizable in full within three years and without material capital investments.
"We are very pleased to have successfully concluded this strategic transaction in such a short space of time, and in such a challenging market environment. We thank our shareholders for their strong support and we thank our own staff, the staff of M-real, and our customers and suppliers for their support and hard work which has not only made this deal possible, but has meant that we have hit the ground running in terms of a smooth transition and integration process from M-real to Sappi," said Ralph Boettger, chief executive officer of Sappi Limited.

"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," Boettger said. "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."
 


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