UPM Seeks to Restructure Stake in Botnia

July 15, 2009 - UPM and Metsäliitto Cooperative today signed a letter of intent to restructure the ownership of the pulp company Oy Metsä-Botnia Ab (Botnia).

Currently, UPM holds a 47% stake in Botnia, M-real holds 30% and Metsäliitto with 23%.

The proposed deal calls for Metsäliitto's and Botnia's share of the Fray Bentos pulp mill and the eucalyptus plantation forestry company Forestal Oriental in Uruguay to be transferred to UPM.

According to UPM, after the proposed restructuring, 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.

"Clarification of Botnia's ownership structure provides a good basis for developing UPM's pulp operations further," said Jussi Pesonen, UPM's president and CEO.

"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," Pesonen said.

Negotiations on the details of the agreement are on-going, UPM said.

Prerequisites for a definitive agreement include a due diligence and finalizing negotiations with Botnia's lenders as well as the required regulatory approvals..

UPM expects the proposed deal to close during the last quarter of 2009.

Botnia operates five pulp mills -- four in Finland and one in Uruguay:

  • Joutseno mill - 650,000 tpy of ECF bleached softwood pulp
  • Kemi mill - 575,000 tpy of softwood and hardwood pulp
  • Rauma mill - 630,000 tpy of ECF bleached softwood pulp
  • Aanekoski mill - 500,000 tpy of ECF bleached softwood pulp
  • Fray Bentos (Uruguay) mill - 1.1 million tpy of ECF bleached eucalyptus pulp

SOURCE: UPM, and Botnia

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