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NEWSPRINT DEAL: NORSKE SKOG PAYS $840M FOR FLETCHER CHALLENGE

VANCOUVER, BC — Norske Skogindustrier ASA of Norway has bought the worldwide pulp and paper assets of New Zealand-based Fletcher Challenge Ltd. for $2.5 billion (US), creating the second-largest news…

VANCOUVER, BC — Norske Skogindustrier ASA of Norway has bought the worldwide pulp and paper assets of New Zealand-based Fletcher Challenge Ltd. for $2.5 billion (US), creating the second-largest newsprint company in the world. The deal involves a cash payment of $840 million (US) and assumption of $1.66 billion (US) in debt. As part of the deal, Norske gains 50.8% control of Vancouver-based Fletcher Challenge Canada Ltd.

Given the size of debt taken on by Norske — $1.66-billion (US) — many analysts question whether the Norwegian company will hold on to Fletcher Challenge Canada before the deal is expected to close in July. “They (Norske) will probably spin off some of the assets that they picked up, including the Canadian operations,” said Craig Campbell, a partner for PricewaterhouseCoopers’ global forest and paper practice in Vancouver. Another scenario has Norske keeping the newsprint assets in British Columbia and selling the pulp assets. Given the spate of deals recently, the open question is what UPM-Kymmene and Bowater will do. In Canada, there are two possible takeover targets: Montreal-based Alliance Forest Products and Vancouver-based Pacifica Papers. “Bowater might be interested in either of these companies — both whom are in play,” Campbell noted.