Filed by Champion International Corporation Pursuant to Rule 425 under
the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Champion International Corporation
Commission File No.: 001-03053
[Slide Presentation given by Champion International Corporation
on February 29, 2000]
[Slide 1]
[Logo of post-merger Champion International Corporation]
THE PREMIER GLOBAL FOREST PRODUCTS COMPANY
Presentation by:
Richard E. Olson
Chairman and Chief Executive Officer
Champion Internation Corporation
Global Paper and Forest Products
Industry Conference
CREDIT FIRST
SUISSE BOSTON
New York, New York
February 29, 2000
[Slide 2]
[Logo of post-merger Champion International Corporation]
Worldwide ranking
Total worldwide sales USD 13.6 bil. 3
Market capitalization USD 13.5 bil. 2
o This is the first significant cross-Atlantic strategic merger.
o This merger is the first step in creating a global company with superior
growth prospects in the forest products industry.
o Champion International will be poised to serve customers throughout the
world: Europe, North America, South America and Asia.
o The new company will have complementary product lines and an established
presence in the developing markets of South America and China.
o Champion International will have leading edge product quality and
service.
[Slide 3]
ENTERPRISE VALUE OF SELECTED PAPER COMPANIES
[Bar graph representing the following information :
Market Value Net Debt
(USD millions)
International Paper 17676 11837
CHAMPION approx. 15000 approx. 5000
Weyerhauser 12099,4 4211
Stora Enso 10595,2 5585
Georgia-Pacific 9504,9 5546
Smurfit-Stone Contai 3686,7 5965
SCA 5846,8 2823,1
Williamette 4155,6 1706,1
Jefferson Smurfit 2851,2 2139,3
Mead 3419,3 1498,6]
o The new Champion wil have an enterprise value of about US$20 billion, and
be one of the few truly global forest products companies.
o The gap in size between the big five and all others is significant.
o UPM-Kymmene profile:
- Total shareholder return has averaged in excess of 30% since 1995.
- Earned in excess of their costs of capital every year since 1994.
- Very efficient and cost competitive manufacturing base.
- Exceptionally strong Balance Sheet
o Includes significant investments in Nokia and METSO.
[Slide 4]
WORLD'S LARGEST PAPER AND PAPER BOARD PRODUCERS 1999
[Bar graph representing the following information :
Paper Paperboard
(capacity in million tons)
Stora Enso & 9,3 3,57
Consolidated Paper
International Paper 1) 7,1 6,6
CHAMPION 11,698 0,372
Abitibi-Consolidated 2) 7,2 -
Smurfit-Stone Container 0,1 7,1
Georgia-Pacific 3) 3,2 3,6
Oji Paper 5 1,7
Nippon Group 4) 4,9 1,7
Weyerhaeuser 5) 1,9 3,8
Metsa-Serla, Myllykoski 4,4 1,25
1) incl. 1/2 of Carter Holt Harvey (50,3%)
2) incl. Donohue and 1/3 of PAPCO and Boise Cascade marketing agreement
3) incl. Georgia-Pacific Tissue
4) incl. 1/2 of NORPAC, joint venture (50%)
5) incl. MacBlo and 1/2 of NORPAC, joint venture (50%)]
o Consolidation by grade and product will continue.
o Larger companies will have the ability to better manage capacity in a way
that balances inventories with customer demand and seasonal cyclicality.
[Slide 5]
The merging companies have an excellent strategic fit for each other
o parallel strategic intent
o complementary product lines
o complementary geographical presence
o This merger is a unique strategic fit that will create additional value
for shareholders in the new company.
o The new Champion will have a strong balance sheet, financial flexibility,
commitment to financial discipline and be focused on maximizing total
shareholder return.
[Slide 6]
COMPLEMENTARY WORLDWIDE PRODUCT LINES - PULP AND PAPER
Europe N-America S-America
in 1000 UPM Champion UPM Champion UPM Champion Total
metric tons
Publication paper 5325 455 740 186 6706
LWC 2110 455 648 186 3399
SC 1200 92 1292
Newsprint 2015 2015
Business papers 1950 1895 384 4029
Uncoated fine paper 1200 1225 384 2809
Coated fine paper 750 470 1220
Converting materials 850 480 1330
Converting pap 850 108 958
Linerboard 372 372
Paper and board, 8125 455 2916 570 12085
Chemical pulp, to 2900 2794 340 6034
Paper, board and pulp,
total 11026 455 5709 910 18099
o The new Company is positioned to serve customers throughout the world
with cost- effective capacity located in most major consuming markets.
[Slide 7]
COMPLEMENTARY WORLDWIDE PRODUCT LINES - FOREST & WOOD
PRODUCTS
Europe N-America S-America
UPM Champion UPM Champion UPM Champion Total
Sawn timber, 2000 3851 5851
1000 cubic metres
Plywood,
1000 cubic metres 850 1181 2031
Forestlands,
million hectares 1266 77 2023 612 3978
Owned 933 77 1842 546 3398
Managed or 333 181 66 580
controlled
o New opportunities for growth in value-added wood products in Europe are
created by this merger.
[Slide 8]
PRODUCTION PLANTS OUTSIDE EUROPE
[Map showing plant locations outside of Europe]
o The new company has the unique ability to capitalize on its presence in
the high-growth, emerging markets of Brazil and China.
[Slide 9]
PRODUCTION PLANTS IN EUROPE
[Map showing plant locations in Europe]
o UPM is a major producer of pulp, paper and wood products in Europe.
[Slide 10]
STRATEGY
o increase shareholder value as principal goal
o focus on core businesses
o emphasis on profitability
o financial discipline
o intensive co-operation with global and local customers
o take advantage of global growth opportunities
o The new company will have a balanced portfolio of products that include
wood products and converting materials to complement its pulp and paper
business.
o Common strategic goals create a strong platform for the financial
performance of the new company.
[Slide 11]
STRENGTHS
o Global presence
o Good long-term customer relationships
o Efficient production capacity
o Economies of scale
o High level of vertical integration
o Integration of know-how and cultures
o The new company will have a strong global production base supported by a
healthy fiber base.
o Champion's 40 years of experience in Brazil means the new company will be
a low-cost producer with sizable market presence and forest technology
advantage in a rapidly growing region.
o The new Champion will have an appreciating asset in its extensive forest
holdings which are strategically placed to support its manufacturing
facilities.
o These combined strengths and a common management vision will help deliver
profitability, growth and shareholder value.
[Slide 12]
SYNERGIES
Synergies in millions (US$) 2001 2002 2003
A. Cost savings $150 $175 $175
- purchasing
- manufacturing
- logistics
- S, G&A
B. Revenue related synergies 50 125 150
- best practice in marketing
- additional volumes
TOTAL $225 $300 $325
------------------
o Both companies have a proven track record of achieving their profit
improvement initiatives in the promised amounts and timeframe.
o These synergies are in addition to both company's previously announced
profit improvement programs.
[Slide 13]
ACCRETION ANALYSIS
Market estimates for EPS (I.B.E.S.) in 2001
UPM-Kymmene US$ 3.41
Champion US$ 7.07
Champion
with cost synergy benefits
of US$150 million US$ 3.75
Accretion US$ 0.24
7.1%
o Even if only US$150 million of cost synergies are achieved, this
transaction will be accretive in the year 2001.
o The anticipated top-line improvements will further improve the
performance of the new Champion, making this merger even more accretive.
[Slide 14]
FINANCIAL OBJECTIVES
ROE Riskfree Rate + 5%
ROCE Internally for its businesses, pre-tax return 15%
Strong Balance Sheet
o Exceed our cost of capital.
o Limit capital spending, on average, for on-going operations to
depreciation levels.
o No new paper machines or greenfield mills are being planned by the new
company.
o The new company's management will focus its growth plans on acquisitions,
largely for cash.
o The management of the new Champion is committed to continuing a financial
policy that rewards shareholders consistently.
[Slide 15]
DIVIDEND POLICY
Annual dividend anticipated to average 1/3 of the annual profit
o Consistent with UPM-Kymmene's current practice, Management will recommend
to the Board of Directors that dividends be declared and paid annually at a
level of at least one- third of net income on a trailing basis.
o Therefore, current Champion shareholders will receive an improved
dividend.
[Slide 16]
DEAL STRUCTURE:
Exchange ratio:
Champion shareholders will receive 1.99
UPM-Kymmene shares for 1 Champion share
Ownership structure:
UPM-Kymmene shareholders 58%
Champion shareholders 42%
o The 1.99 exchange value delivers significant value to Champion
shareholders: The 30% premium was based on the 30 day average of the share
price ratio of UPM and Champion prior to the announced merger.
o An all stock deal maximizes the financial strength of the new company.
[Slide 17]
DEAL STRUCTURE
All stock deal - pooling of interests
o Preserves the strong balance sheet and liquidity
o Enhances growth prospects
o Increases the share of US investors
o Increases liquidity for shares
o Pooling of interests means that the new company is financially strong on
"Day One" following the closing.
o It is important not to confuse a short-term decrease in the sector's
share prices with the underlying value of UPM and Champion shares.
[Slide 18]
POOLING OF INTERESTS
o No distortion to future E.P.S. from goodwill
o Strong balance sheet preserved
o Limitations for asset sales in the near future (excluding listed shares)
o share buy-backs not possible in the near future
o Pooling restricts asset sales for a period of time but both companies
have already divested most of their non-core assets.
o The restriction of share repurchasing will not reduce the company's
commitment to increasing total return to shareholders.
o After the merger, there is no restriction on dividends under pooling of
interests.
o The new Champion will have all possible options for increasing the
financial returns to shareholders once the pooling period passes.
[Slide 19]
LISTINGS:
Shares listed in Helsinki (HEX) and New York (NYSE)
Champion shareholders will have the option of getting ADR's listed on the
New York Stock Exchange or shares listed on the Helsinki Stock Exchange
o A large tax liability for current Finnish UPM shareholders would have
been created if the new company were domiciled in the United States.
o Global companies need to be traded in several stock exchanges where they
can provide adequate liquidity.
o The ADR's of other companies (such as Nokia and DaimlerChrysler) have
significant liquidity as well as will the ADR's of the new company with the
addition of the Champion shareholders.
[Slide 20]
TIME TABLE
Closing in May 2000
Preceded by :
o Approval of requisite authorities
o Shareholders' approval
[Slide 21]
THE NEW CHAMPION INTERNATIONAL
o Increased earnings and dividends
o Improved growth opportunities
o Strengthened position among the largest companies in the sector
o Committed to maximizing total shareholder return
o Committed to achieving merger synergies
o Committed to financial discipline
[Slide 22]
These materials contain certain statements that are neither reported
financial results nor other historical information. These statements are
forward-looking statements within the meaning of the safe-harbor provisions
of the U.S. federal securities laws. These forward-looking statements are
subject to risks and uncertainties that could cause actual results to
differ materially from those expressed in the forward-looking statements.
Many of these risks and uncertainties relate to factors that are beyond
UPM-Kymmene's and Champion International's ability to control or estimate
precisely, such as future market conditions, the behavior of other market
participants and the actions of governmental regulators. These and other
risk factors are detailed in the two companies' SEC reports. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of these materials. The companies do not
undertake any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the
date of these materials.
Investors and security holders are advised to read the joint proxy
statement/prospectus regarding the business combination transaction
referenced in the foregoing information, when it becomes available, because
it will contain important information. Such joint proxy
statement/prospectus will be filed with the Securities and Exchange
Commission by UPM-Kymmene and Champion International. Investors and
security holders may obtain a free copy of the joint proxy
statement/prospectus (when available) and other related documents filed by
UPM-Kymmene and Champion International at the Commission's website at
www.sec.gov. The joint proxy statement/prospectus and the other documents
may also be obtained from UPM-Kymmene by contacting UPM-Kymmene, Attn: Reko
Aalto-Setala, Etelaesplanadi 2, FIN-00101 Helsinki, Finland, and/or
Champion International by contacting Champion International, Attn: Tom
Hart, One Champion Plaza, Stamford, Connecticut 06921.
Champion International, its directors, executive officers and certain other
members of Champion International management and employees may be
soliciting proxies from Champion International shareholders in favor of the
merger. Information concerning the participants will be set forth in the
joint proxy statement/prospectus when it is filed with the Securities and
Exchange Commission.
[Slide 23]
[Logo of post-merger Champion International Corporation]
THE PREMIER GLOBAL FOREST PRODUCTS COMPANY
