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M-real rejects UPM offer to buy larger stake in Botnia

Feb. 2, 2007 - UPM's chief executive yesterday expressed disappointment in M-real's decision not to sell-off more ownership of pulp producer Botnia.

According to UPM, M-real rejected its offer of EUR 500 million for a 15% stake in Botnia and refused to sell a 9% stake in Botnia to the Metsäliitto Group for EUR 240 million.

The offers stem from M-real's October 2006 announcement of a strategic review that included the possible sale of its stake in Metsä-Botnia.

UPM currently holds a 47% stake in Botnia, while M-real holds 39% and Metsäliitto Cooperative holds 14%.

At a 2006 earnings press conference, Jussi Pesonen, UPM's president and CEO, said, ""We made the best offer. In our offer we stated that we would be ready to discuss other alternatives as appropriate. During November-January, UPM made multiple requests to M-real to start negotiations. However, they did not lead to negotiations."

Botnia is Europe's second largest pulp producer with five mills in Finland and production capacity of 2.7 million tonnes a year. About 80 percent of production is sold to the paper mills of Botnia's owners, while the other 20 per cent is sold on the market, mainly in Europe.

"We believe that both M-real and UPM share common business interests in Botnia as major pulp users. Cost efficient high-quality pulp is an important component of value creation for both of us."

Pesonen said that the business goes on and the development of Botnia will continue with UPM's support. "The value of Botnia, however, will be enhanced only if it is developed focusing on pulp users' needs."

SOURCE: UPM

UPM Offers M-real EUR 500 Million for Botnia Shares (11/9/2006)




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