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UPM to Acquire Myllykoski and Rhein Papier
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Helsinki, Finland, 21 December 2010 -- UPM-Kymmene Corporation has entered into an agreement to acquire Myllykoski Corporation and Rhein Papier GmbH. The approximate enterprise value of the businesses being acquired is EUR 900 million.

Myllykoski Corporation and Rhein Papier GmbH consist of seven publication paper mills in Germany, Finland, and the United States. The total annual paper production capacity is 2.8 million metric tons. In addition, Myllykoski Corporation owns 0.8% of the Finnish energy company Pohjolan Voima Oy, with an estimated value of EUR 70 million. Following the transaction, UPM Group's balance sheet assets will increase by approximately EUR 1.6 billion.

The transaction will be financed through a directed share issue of 5 million UPM shares, with current market value of approximately EUR 60 million, and long-term debt arrangements amounting to EUR 800 million.

The transaction is subject to customary closing conditions, including, among others, the approval of the regulatory authorities. Myllykoski will continue to operate independently until the transaction is closed. The target is to close the transaction during the second quarter of 2011.

The transaction will create annual synergy benefits estimated to exceed EUR 100 million, mainly from 2012 onwards. Synergy benefits will be reached for the most part by rationalizing production, logistics, and sourcing and reducing overlapping activities. The related restructuring and investment costs of the combined operations are estimated at approximately EUR 100-150 million.

The transaction is estimated to have an immediate positive effect on UPM's cash flow, starting from the second half of 2011, and on earnings per share in 2012.

After the completion of the transaction, UPM’s gearing ratio is estimated to rise by 8 percentage points. At the end of September 2010, the gearing ratio was 51%. UPM will report from the transaction a one-off gain of approximately EUR 300 million.

Jussi Pesonen, UPM's president and CEO, said that UPM is focused on improving the cost efficiency and profitability of its European paper operations. "With this transaction, we create the conditions needed for improving UPM's cash flow and mid-term profitability,” he said. 

“Combining forces and rationalizing production is necessary for the future of the whole industry in Europe. This means both closing unprofitable production capacity and investments in order to increase cost efficiency,” Pesonen said.

“Paper is one of UPM's core businesses and our target is undisputed cost leadership as well as growth in China and other emerging markets. However, a balanced development of the different businesses within UPM is also in our interest. As a result of consolidation in the European paper business, we will also have better financial resources to implement our growth plans in our other businesses," Pesonen said.

Myllykoski is a family-owned international paper group. It is one of the largest publication paper producers in the world. The company produces uncoated and coated publication papers, including newsprint. Myllykoski employs approximately 2600 people, of which 1900 are based in Germany.

UPM consists of three Business Groups: Energy and pulp, Paper, and Engineered materials. The Group employs around 23,000 people and it has production plants in 15 countries. In 2009, UPM's sales amounted to EUR 7.7 billion. UPM's shares are listed on the Helsinki stock exchange. Additional information is available at www.upm.com.


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