Business News
UPM AND METSÄLIITTO SIGN A LETTER OF INTENT ON NEW OWNERSHIP STRUCTURE OF BOTNIA; UPM TO ACQUIRE URUGUAYAN OPERATIONS AND ADDITIONAL SHARES IN PVO
Wednesday 15. July 2009 - UPM and Metsäliitto Cooperative have today signed a letter of intent to restructure the ownership of the pulp company Oy Metsä-Botnia Ab (Botnia).
Currently the shareholders of Botnia comprise UPM with a holding of 47%, M-real with 30% and Metsäliitto with 23%.
In the proposed transaction Metsäliitto’s and Botnia’s share of the Fray Bentos pulp mill and the eucalyptus plantation forestry company Forestal Oriental in Uruguay would be transferred to UPM.
Post transaction, Botnia’s operations would consist of its current operations in Finland, with Metsäliitto acquiring incremental shares to move to a position of majority. Metsäliitto’s holding would be approx. 53% and M-real’s holding approx. 30%. UPM’s ownership in Botnia would decline to approx. 17%, which corresponds to UPM’s use of Botnia’s pulp produced at the Finnish mills. Botnia would continue to act as the sales channel of UPM’s market pulp.
Following the proposed transaction, UPM’s share of pulp capacity of Botnia’s Finnish mills would decrease from 1.1 million tonnes to 400,000 tonnes. At the same time, UPM’s share of eucalyptus pulp would increase by approx. 500,000 tonnes and UPM would have the direct ownership of the Uruguayan plantations.
In addition, UPM would also acquire 1.2% of the energy company Pohjolan Voima Oy (PVO) from Botnia.
UPM’s interest bearing net debt is estimated to increase by approx. EUR 400 million including the debt of the Uruguay operations with minor effect on UPM’s gearing level. The net cash effect of the transaction on UPM would be an outflow of approx. EUR 90 million. The transaction is expected to have a positive impact on UPM’s results in 2010.
The proposed transaction, as detailed in the letter of intent is in line with UPM’s strategy to grow in cost competitive pulp and emission free energy. Last year the company formed a market driven Business Group out of its three modern pulp mills and significant energy assets.
“Clarification of Botnia’s ownership structure provides a good basis for developing UPM’s pulp operations further. The Uruguay mill would increase UPM’s own pulp capacity to 3.18 million tonnes and strengthen its position as a reliable partner in market pulp. The mill would also reinforce the company’s presence in the emerging markets,” says Jussi Pesonen, UPM’s President and CEO.
Negotiations on the details of the agreement continue. Prerequisites for a definitive agreement include a due diligence and finalising negotiations with Botnia’s lenders as well as the required regulatory approvals.
The proposed transaction is expected to be closed during the last quarter of 2009. UPM will communicate about the completion of the agreement upon signing.