Sappi Limited, the South Africa-based parent of U.S coated magazine paper maker Sappi Fine Paper North America, has agreed to acquire European paper supplier M-Real for $1.1 billion. The transaction is subject to a purchase price adjustment for net debt and working capital.
The deal includes M-Real’s graphic paper business and four of the company’s paper mills in Finland, Germany and Switzerland. Sappi expects the deal to increase its European graphic paper production from 2.6 metric tons to 4.5 metric tons per year.
M-Real produces paperboard and magazine paper in the European and U.S. markets. The operating result of the units included in the deal was down about $44 million during the first half, according to M-Real. The company’s overall first half operating result was about $109.6 million, down 7 percent from the same period last year.
“We anticipate that the acquisition will increase profitability, resulting in better returns and improved cash flows for the group,” Sappi Limited CEO Ralph Boëttger said in a statement. “We expect that these benefits will in part be achieved due to expected annual synergies coming from the maximizing of capacity utilization and distribution, the integration of sales and administration and the rationalization of manufacturing across the Sappi group.”
The acquisition will be financed through a combination of equity, assumed debt, cash proceeds from a rights offering and a vendor note, Sappi said.