Arctic Paper makes offer to take over Rottneros

Artic Paper has made a public offer to take over all the outstanding shares in pulp producer Rottneros. The non-integrated fine paper producer expects significant synergies, especially in terms of pulp supply.

Arctic Paper has today, on 7 November 2012, announced a public offer to the shareholders in Rottneros to transfer all of their shares in Rottneros to Arctic Paper. Arctic Paper offers 0.1872 newly issued Arctic Paper shares for each Rottneros share. The offer values each Rottneros share to SEK2.30 per share based on Arctic Paper's closing price on 6 November 2012, the last trading day prior to the announcement of the offer. The offer values Rottneros at approximately SEK351m, based on 152,571,925 outstanding shares in Rottneros. According to the preliminary timetable included in Arctic Paper's announcement, the acceptance period is to run from 22 November 2012 to 12 December 2012.

"Through the creation of an integrated pulp supplier and fine paper producer, the combined group will be far less vulnerable to volatile pulp market prices over a business cycle. Furthermore, the group mitigates currency risks through a reduced exposure to non-European currencies. Consequently, the volatility in financial performance is expected to decrease," Arctic Paper said in its press release.

Arctic Paper has for a longer period of time held discussions with the Board of Directors of Rottneros regarding a combination of the two companies, Rottneros said in a press release. According to the company's Board of Directors, Rottneros is in a sound financial position with a market capitalization of approximately SEK 300 million and net turnover of approximately SEK 1.5 billion.

"A merger will result in both shareholder groups gaining the benefits of a significant reduction in the volatility of earnings and cash flows with ensuing lower operating risk. Over time, this should entail a lower cost of financing and a higher valuation of the shares. For Rottneros shareholders the offer represents an upstream integration in the value chain through them becoming owners of Arctic Paper’s current operations in fine graphic paper," Rottneros' Board of Directors commented on the proposed merger.

According to Arctic Paper the combination of the two companies is expected to lead to cost synergies within purchasing, logistics and overhead. The main purchasing and logistics synergies are expected to be attributable to an increase in Rottneros’ supply of pulp to Arctic Paper, reducing the combined group’s need for external sales and purchases of pulp. In total, synergies are estimated to approximately SEK 80 million (PLN 39 million) and are estimated to be fully realized within 12 to 18 months.

Rottneros is an independent producer of of pulp and operates two pulp mills in Sweden, with a total annual production capacity of approximately 400,000 tpy. In 2011, Rottneros employed around 300 people and the consolidated sales revenue amounted to SEK 1,513 million (PLN 689 million). Rottneros is listed on the Stockholm stock exchange since 1987.

Arctic Paper is one of the large suppliers of bulky book paper and fine paper. The group’s paper mills are located in Sweden (Grycksbo and Munkedal), Poland (Kostrzyn and Odra) and Germany (Mochenwangen) with a total annual production capacity of more than 800,000 tonnes of paper. The company has 15 wholly-owned sales and distribution companies.

According to Rottneros, Actic Paper's offer does not involve any material changes to the future operations nor for the overall strategy of Rottneros’ production units. However, some administrative functions in these units as well as at the respective head offices are expected to be re-coordinated resulting in some limited redundancies.

The takeover is conditional upon the necessary approvals from the relevant competition authorities. Arctic Paper expects these to be granted before the end of the acceptance period.

The Board of Directors of Rottneros unanimously recommends the shareholders to accept the offer from Arctic Paper.

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