UPM INFO
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 affected 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
Repap'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 Niemela, the Present 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.
About Repap
Repap is a major producer of coated groundwood paper (LWC) with a 9% share of
the total North American capacity. In 1999, the company's net sales amounted to
CAD 570 million (EUR 425 million) and operating profit to CAD 68 million (EUR 51
million). The company's high quality paper is utilized in magazines, catalogs,
inserts and commercial printing applications. Repap's world-class coated paper
complex in New Brunswick, Canada, has two modern paper machines with a design
capacity of 450,000 metric tons, a northern bleached softwood kraft pulp mill
with an annual capacity of 235,000 metric tons and an integrated groundwood pulp
mill with an annual capacity of 125,000 metric tons. Repap also has two sawmills
with an annual capacity of 137,000 cubic metres. Repap employed 1,480 persons at
the end of 1999.
Forward-looking statement
This press release contains 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 law. 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 the companies' 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 this press release. 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 this press
release.
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For further information, please contact:
UPM-Kymmene Corporation:
Martin Granholm, Executive Vice President, tel. +358 204 15 0004
Olavi Kauppila, Vice President, Investor Relations, tel. +358 204 15 0658
Repap Enterprises Inc.:
Stephen Larson, President & Chief Executive Officer, tel. 1 (203) 964-6163
Michelle Cormier, Vice President & Chief Financial Officer,
tel. 1 (203) 964-6168
UPM-Kymmene Corporation
Corporate Communications
