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UPM purchases Champion
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February 17, 2000: 8:52 p.m. ET
Finnish forestry company pays $6B for U.S. rival in first trans-Atlantic paper deal
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NEW YORK (CNNfn) - Finnish forestry company UPM-Kymmene unveiled Thursday it will buy U.S.-based rival Champion International Corp. for about 6.6 billion euros ($6.56 billion) in stock, creating one of the world's biggest paper products companies in the first transatlantic deal in the industry.
Helsinki-based UPM is offering 1.99 of its own shares for each Champion (CHA: Research, Estimates) share, a 30 percent premium to the U.S. firm's closing price Wednesday.
However, the American depositary receipts on UPM-Kymmene (UPM: Research, Estimates) fell 2-11/16 to 30-7/16, while shares of Stamford, Conn.-based Champion fell 9/16 to 51-1/16.
For that reason, while the fundamentals of the deal are strong, said one paper industry analyst, there may soon be competition from other bidders.
"I would not be surprised if we see this deal scuttled and another one take its place," said Kathryn McAuley, an analyst with Brown Brothers Harriman. "I think this just opens the doorway for another bidder."
UPM said the merger would generate savings of 330 million euros a year from 2002 onwards, stemming largely from cuts in transport and purchasing costs, joint marketing efforts, and back-office cost reductions.
"UPM-Kymmene is a leader in the forest industry in Europe, and Champion has leadership positions in North America and Brazil," said UPM's president and chief executive officer, Juha Niemela, who will be CEO of the combined company. "We expect this geographic diversification to fortify our strong position in the magazine and fine papers businesses and to moderate the traditional cyclicality in our earnings base."
The merged firm will be called Champion International, and will have headquarters in Helsinki. With combined pro forma 1999 revenue of 13 billion euros and paper capacity of 12.1 million tons a year, it will the world's biggest paper maker, leapfrogging past Stora-Enso, the Finnish-Swedish group formed in 1998.
The deal, which faces shareholder and regulatory approval, is expected to close during the first half of the year. 
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