UPM-Kymmene and Metsäliitto Group restructure their forest products industry

UPM-Kymmene Corporation, Metsä-Serla Oy and Oy Metsä-Botnia Ab have today (10th December, 1996) signed a letter of intent, according to which UPM-Kymmene will sell the Simpele paperboard, paper and carton mills to Metsä-Serla and the Joutseno Pulp chemical pulp mill to Metsä-Botnia. In the same connection, Metsä-Serla will sell the business operations of Metsä-Sellu Oy (Äänekoski Pulp Mill) to Metsä-Botnia. Metsä-Botnia is a resource-producing company, primarily producing chemical pulp, of which the Metsäliitto Group owns 53 % and UPM-Kymmene 47 %.
At the same time, the parties have agreed that Metsä-Botnia will instantly launch a development project worth about FIM 650 million at Joutseno Pulp. The wood supply operations of the Joutseno Pulp and Simpele mills will be transferred from UPM-Kymmene to Metsäliitto.
The value of the deal for UPM-Kymmene is about FIM 2 billion, of which Metsä-Serla will pay nearly half in cash. The balance UPM-Kymmene will invest in Metsä-Botnia´s shares and in a shareholder loan to be granted to the company so as to maintain the current ownership structure and to finance the investment in Joutseno Pulp. This arrangement will yield a sales profit of about FIM 700 million to UPM-Kymmene.
The employees of the mills to be sold will retain their previous benefits under the new ownership. The transfer of the wood supply to Metsäliitto will not affect the employees in UPM-Kymmene's forestry department.
The deals are subject to approval by the respective companies' boards of directors and the authorities supervising competition in the market. The objective is to make the deal effective in the first quarter of 1997.
The mills at Simpele and Joutseno Pulp had a combined turnover of FIM 2 billion in 1995, of which Group internal sales accounted for FIM 1.3 billion. The mills together employ slightly over one thousand people.
-Joutseno Pulp is UPM-Kymmene's only non-integrated chemical pulp mill. Therefore, it is better suited to be a part of Metsä-Botnia, which even at this moment accounts for a large proportion of the company's chemical pulp supply, comments UPM-Kymmene's President and CEO Juha Niemelä.
After completion of this deal, UPM-Kymmene's self-supply of chemical pulp will increase by about 50,000 tons a year.
- The Simpele mill is very successful, but it is the UPM-Kymmene Group's only board mill. As a part of a bigger manufacturing and marketing operation, the possibilities for further development of Simpele will be better, concludes Mr. Niemelä.
For further details:
Mr. Juha Niemelä, President and CEO, tel. +358 204 15 0001
Mr. Heikki Sara, Senior Vice President, Resources, tel. + 358 204 15 0040
Mr. Kari Toikka, Vice President, Investor Relations, tel. + 358 204 15 0014