Helsinki, Finland — Stora Enso announced on September 21 that it has signed a definitive agreement to sell its Nor…
Helsinki, Finland — Stora Enso announced on September 21 that it has signed a definitive agreement to sell its North American subsidiary to NewPage Holding Corporation of Ohio for approximately $2.5 billion. Under the terms of the agreement, Stora Enso will receive approximately $1.5 billion in cash, a $200 million note, and a 19.9% equity interest in the new company.
The operations being sold include its eight North American publication, fine paper and specialty paper mills, six in Wisconsin, one in Ohio, and one in Port Hawkesbury, NS. Stora Enso will retain Coresno’s North American operations producing cores and coreboard for industrial use. The transaction is expected to be finalized during the first quarter of 2008, subject to customary regulatory approvals.
The divestment will not generate any gain or loss to Stora Enso, based on current exchange rates and the book values prior to Stora Enso’s impairment charge announced earlier in September, but will reduce the impairment by about $1.1 billion; nor is it expected to have any material impact on the annual operating profit of the Stora Enso Group, as these operations are currently operating around breakeven profit levels.
“We believe that by combining Stora Enso’s North American operations with those of NewPage, owned by Cerebus Capital, a leading investment firm, we are contributing to the formation of a highly attractive player in the North American paper industry,” said Stora Enso Group CEO Jouko Karvinen. “This is the first major step in focusing our operations to improve the long-term earnings of Stora Enso.”
NewPage Holding currently operates four mills in Kentucky, Michigan, Maryland and Maine. The new company will retain the NewPage name, and be headquartered in Miamisburg, OH. Rick Willett, NewPage’s president and COO noted “These cost savings combined with our increased scale will enable us to make further high-return investments in lower cost capacity, increase supply chain efficiencies and product availability and enhance environmental leadership.”
The future is unknown for individual mills changing hands in this transaction, including the Port Hawkesbury newsprint and glossy paper mills in Nova Scotia, according to a CBC News story. Stora will continue operation of that mill until the sale is complete, and the CBC notes that NewPage Chairman and CEO Mark Suwyn feels it would be inappropriate to discuss the future of the mill before his company takes ownership. John Boudreau, warden of Richmond County, said that after months of rumours of a possible shutdown, news of the sale is positive, in spite of the uncertainty. The plant is a major employer in the region, and accounts for 30% of the county’s tax revenue.
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