PRESS RELEASE
UPM-KYMMENE TO ACQUIRE REPAP
Helsinki, Finland and Stamford, Connecticut, (August 29, 2000) - UPM-Kymmene Corporation (Helsinki Stock Exchange: UPM1V; NYSE:UPM) and Repap Enterprises Inc. (TSE:RPP) today announced that they have signed an acquisition agreement under which UPM-Kymmene will acquire Repap in a transaction to be effected by way of an amalgamation. Pursuant to the agreement, Repap’s shareholders will receive CAD 0.20 per common share, which represents a premium of approximately 100% over the recent trading price of Repap common shares on The Toronto Stock Exchange. The transaction values Repap’s equity at approximately CAD 160 million (EUR 120 million), implying a total enterprise value for Repap of approximately CAD 1.35 billion (EUR 1.01 billion). The transaction will result in a goodwill value of approximately CAD 400 million (EUR 300 million). With respect to Iceberg's outstanding debt securities, UPM-Kymmene is considering its options, which may include purchases of such securities in negotiated transactions, a redemption of all or a portion of such securities after consummation of the transaction and/or leaving such securities outstanding.
The transaction has been unanimously approved by the boards of directors of both UPM-Kymmene and Repap. In addition, Repap’s two largest shareholders, the Third Avenue Trust and TD Asset Management Inc., have agreed to support the transaction and vote their combined total of approximately 31% of Repap’s common shares in favour of approving the transaction, subject to certain conditions as outlined in their respective support agreements.
The transaction requires the approval of 66 2/3% of the votes cast by Repap shareholders. A shareholders’ meeting to approve the amalgamation is expected to be held in mid-October. The transaction is conditional upon receipt of all necessary regulatory approvals. The transaction does not require the approval of UPM-Kymmene shareholders.
The acquisition supports UPM-Kymmene’s long-term strategy. The transaction strengthens UPM-Kymmene’s global leadership in magazine papers and it is a logical step for UPM-
Kymmene to become a major local magazine paper producer in North America. UPM-Kymmene continues to further develop a low cost production structure with state-of-the-art facilities. In addition, substantial synergies can be achieved. UPM-Kymmene estimates that approximately CAD 50 million (EUR 37 million) in annual pre-tax synergies can be achieved by 2002 through product and market mix optimization, cost savings in purchasing, logistics and selling, general and administrative expenses as well as via improvement through best practices.
Juha Niemelä, the President and Chief Executive Officer of UPM-Kymmene said “that Repap’s management and personnel have done an outstanding job over the past years to improve the financial and operational performance of the company. The fully integrated mill will enable UPM-Kymmene to better serve its North American customers”.
Stephen Larson, the President and Chief Executive Officer of Repap, stated that “Repap’s world class operations and people will complement UPM-Kymmene’s core competence of efficiency very well”.
Repap has agreed not to solicit competing offers or proposals to the transaction, although it may respond to an unsolicited superior proposal. As a condition of UPM-Kymmene entering into the transaction, Repap has granted UPM-Kymmene an irrevocable option to purchase newly issued common shares of Repap representing approximately 19.9% of the issued and outstanding common shares of Repap. This option may be exercised by UPM-Kymmene if a competing acquisition proposal is publicly announced. In certain circumstances, Repap will be required to pay a termination fee to UPM-Kymmene. The option and the termination fee have an aggregate economic value of CAD 18 million (EUR 13.6 million), representing approximately 1.3% of Repap’s enterprise value.
RBC Dominion Securities Inc. acted as financial advisor to UPM-Kymmene and Donaldson, Lufkin & Jenrette acted as financial advisor to Repap.
About UPM-Kymmene
UPM-Kymmene, which is based in Helsinki, Finland, is one of the world’s largest forest product companies and paper producers. The Group’s turnover in 1999 amounted to EUR 8.3 billion (CAD 11.1 billion) and operating profit to EUR 1.6 billion (CAD 2.1 billion). The company’s product range covers printing papers, converting materials and wood products. Printing Papers, which comprise magazine papers, newsprint and fine papers, account for over half of the Group’s turnover. UPM-Kymmene is the world’s second largest producer of magazine papers and is among the top ten producers of newsprint and fine papers. UPM Converting is among Europe’s leading suppliers of converting materials. The Group is also Europe’s biggest plywood producer and one of the continent’s biggest producers of sawn timber. UPM-Kymmene’s operations are focused on European Union countries and the United States, where the company owns Blandin Paper in Minnesota producing LWC magazine papers. North American sales account for 11% of the Group’s turnover. The Group has production plants in 15 countries and 170 sales and distribution companies spanning five continents. |
