Kymmene Corporation and Repola Corporation to merge

New forest industry company promises even better service

The boards of Kymmene Corporation, Repola Corporation and its subsidiary United Paper Mills Ltd have decided that these companies will merge to form a new corporate entity, the name of which will be UPM-Kymmene Corporation. It is planned that the merger will take effect on 1 May, 1996.

The forest industry operations of UPM-Kymmene Corporation will generate net sales of about FIM 45 billion and will employ approximately 32,000 people. The corresponding figures for the Group as a whole will be about FIM 55 billion and 45,000, respectively. The combined net sales of the merging companies in January-April 1995 were FIM 17.4 billion, and the combined result after financing items was FIM 2.0 billion.

Measured in terms of net sales, the new company will be the biggest forest industry enterprise in Europe and one of the biggest in the world. Paper production capacity will exceed 7 million tonnes per annum. Owning about 900,000 hectares of forest land, the company will use over 20 million cubic metres of wood each year.

The merger agreement approved by the companies' boards will be submitted to their shareholders for approval during the course of the autumn. The merger will also require the approval of the authorities concerned. The shareholders of Kymmene Corporation and Repola Corporation will become shareholders of UPM-Kymmene Corporation when the merger comes into effect. Kymmene Corporation's shareholders UPM-Kymmene shares valued nominally at FIM 10 against five of their existing shares. Repola Corporation´s shareholders will be able to exchange their shares for UPM-Kymmene shares on a one-for-one basis. UPM-Kymmene Corporation will be a listed company.

Mr. Yrjö Niskanen, 63, will be nominated as the Chairman of the Board of UPM-Kymmene Corporation. Mr. Casimir Ehrnrooth, 64, and Mr. Tauno Matomäki, 58, will be nominated as Vice Chairmen. These three persons will form the Executive Committee of the Board.

"The merger will combine two forest industry companies with substantial know-how and high-tech assets. The order of magnitude increase in size brought about by the merger will be an additional benefit in the capital-intensive forest industry. I am convinced that the merger is in the interests of Repola's and Kymmene's shareholders," says the Chairman of the Board of Kymmene Corporation, Mr. Casimir Ehrnrooth.

"Specialization in production and improved capital efficiency are examples of the merger's benefits" says the Chairman of the Board of Repola Corporation Mr. Yrjö Niskanen. The merger will support the development of share performance.

Mr. Juha Niemelä, M.Sc. (Econ.), 49, the Executive Vice President of United Paper Mills Ltd, will be appointed as the President and CEO of UPM-Kymmene. Mr. Martin Granholm, M.Sc. (Eng.), 48, the President of Kymmene Corporation, will be appointed as Executive Vice President of the new company. Mr. Olli Parola, 60, the President and CEO of United Paper Mills, will retire on 30 April, 1996. Mr. Tauno Matomäki, the President and CEO of Repola, and Mr. Harri Piehl, 55, the CEO of Kymmene Corporation, will continue in their present posts until the merger is implemented. Matomäki will then continue as the Chairman of the Board of Rauma Corporation and Pohjolan Voima Oy. Mr. Piehl will take up another position outside the Group.

"The merger will further strengthen the already robust and mutually supportive divisions of the merging companies. At the same time we will be in an even better position to serve our customers," says Mr. Juha Niemelä, who will be appointed as President and CEO of the new company.

The following persons will be appointed as Presidents of UPM-Kymmene's six divisions: Mr. Ismo Lepola, 54, (Magazine Papers), Mr. Pentti Arvela, 51, (Newsprint), Mr, Pehr-Eric Pått, 50, (Fine Papers), Mr. Kari Makkonen, 48, (Sawmilling), Mr. Paavo Ojanpää, 55, (Panel Industry) and Mr. Jaakko Rislakki, 55, (Packaging Industry). Mr. Jan-Henrik Kulp, 52, will be appointed as the Group's Chief Administrative Officer, and Mr. Heikki Sara, 49, as the Chief Production Resources Officer. The above-mentioned persons together with the Chief Executive Officer and the Executive Vice President will constitute the new company´s senior management.

UPM-Kymmene will be the majority shareholder (73%) of Rauma Corporation. Rauma's Board of Director has appointed Mr. Heikki Hakala, 53, the Executive Vice President of Repola Corporation as the President and CEO with effect from 1 May, 1996, when Mr. Martti Unkuri, 59, the company's present President and CEO, is due to retire.

The personnel of the merging companies will become employees of the new company based on an uninterrupted continuation of their existing employment relationships.

JUHA NIEMELÄ

Juha Niemelä, M.Sc. (Econ.), was born in Valkeakoski, Finland in 1946. He joined United Paper Mills Ltd in 1971, and has since served the company in various capacities. Marketing Director in Corporate Administration, Director of the Paper Product Profit Centre and as a member of senior management since 1983. He was appointed as Executive Vice President in 1993, since when he has also been a member of the company´s Board of Directors.

MARTIN GRANHOLM

Martin Granholm, M.Sc. (Eng.) was born in Pietarsaari, Finland in 1946. He joined Oy Wilh. Schauman Ab in 1970, and has since acted in a number of project, production and administrative roles. When Oy Wilh. Schauman Ab merged with Kymmene Ltd, he first acted as the President and CEO of the subsidiary Wisaforest Oy Ab. He was appointed as the President and CEO of Kymmene Ltd in 1992.

HEIKKI HAKALA

Heikki Hakala, M.Sc. (Econ.), A.P.A, was born in Kurikka, Finland in 1941. He worked in the finance departments of various companies before joining Rauma-Repola in 1986. He was appointed as Executive Vice President of Rauma-Repola in 1987, and has held the same post in Repola Ltd since 1991. Heikki Hakala has served as a member of the Board of Directors of a number of companies, including Repola Ltd, United Paper Mills Ltd, Rauma Ltd, W. Rosenlew Ltd, Lassila & Tikanoja Group, Polar Corporation, Garantia lnsurance Company Ltd and Kuusakoski Oy. He is also a member of the Supervisory Board of the Helsinki Stock Exchange and the Supervisory Board of Salama Life Assurance Company Ltd.