21.12.2010

Nordic markets were clearly up as M&A activity stayed hot. Positive news helped to push the Nordic exchanges up nearly 1.5% on average. The Euro was down slightly on Moody’s putting Portugal’s debt rating under review for a potential downgrade. One day after deciding to hold rates near zero, Governor of the Bank of Japan Masaaki Shirakawa said in a press conference, that the bank will continue to monitor the price of the Yen closely.

Chinese Vice Premier Wang Qishan said that the European Union and China will enhance cooperation in high technology trade, improve investment, innovation and customs cooperation. He said it is important to oppose all forms of protectionism. Wang also said that China has taken concrete measures to help Europe deal with the current debt crisis and the markets took the words to imply that China will continue to hold onto Euro area debt and that it is in China’s best interest to continue to try to aid in stabilizing the situation in Europe. This coupled with inaction from North Korea, which was seen as lessening tensions in the peninsula gave the markets an early lift.

Pulp & Paper industry stocks got a huge thrust from the long expected news that UPM has agreed to purchase Myllykoski Group and Rhein Papier GmbH. The transaction is subject to competition authorities’ approval and debt restructuring of Myllykoski Group and Rhein Papier GmbH. It has long been clear that UPM would require the debt restructuring in order to take on Myllykoski.

Myllykoski is among the biggest publication paper producers in the world. Combined Myllykoski and Rhein Papier have seven paper mills with annual capacity of around 2.8 million tonnes. The family-owners of the over 100 year old Myllykoski Corporation had long been reluctant to sell but mounting debt particularly on the alliance partner Rhein Papier’s side forced their hand. The companies have 2600 employees, majority of whom are based in Germany.

The supercalendered and coated (SC) paper and lightweight coated (LWC) paper have been the lifelines for Myllykoski Corporation. UPM Kymmene cut prices aggressively as of late and there has been a long standing pricing war going on even before. One may speculate that UPM might have had precisely this outcome in mind after having no success in direct talks with Björnberg family. Now the company should have more pricing power for magazine paper and can also cut capacity in this area. Obviously the investors are thinking this will also allow for UPM to cut some of the excess capacity in the newsprint area as well. Myllykoski Corporation has some newsprint capacity that might be on its way to go under the hammer. Rhein Papier has a 310 000 TPa newsprint mill that holds the world speed record. That machine along with the Rhein Papier’s new Plattling Papier premium uncoated SC paper 380 000 ton mill are certainly creme de la creme in their respected peer group.

UPM will finance the purchase with 800 million Euros worth of new loans and by issuing 5 million new shares. The new shares will be offered to certain holders of subordinated loan notes of Rhein Papier GmbH. The company expects 100 million annual synergy benefits from 2012 onwards. The rationalization costs are expected to come in between 100 and 150 million. UPM balance sheet assets will grow 1.6 billion as a result of the deal. Among the companies in the industry UPM-Kymmene gained nearly 7%, Stora Enso was up more than 8%, M-Real nearly 3%, Holmen around 5.5% and Norske Skog 4.3%.

Alfa Laval has signed an agreement to acquire Aalborg Industries Holding A/S for a total cash consideration of 5 billion Swedish Kronor from Altor 2003 Fund and LD Equity 1 K/S. The deal is also subject to approval by the competition authorities. Aalborg Industries has around 2,600 employees and is current annual sales of about SEK 3.3 billion . Headquartered in Denmark, Aalborg Industries is a leading equipment and service supplier in the marine and off-shore sectors with operations in 14 countries. Its main products are heat transfer, centrifugal separation and fluid handling systems and the company is a global leader in energy and heating plants for maritime applications. Alfa Laval expects ’meaningful top and bottom line synergies’ in energy efficiency field. Alfa Laval gained 2.88% today.

Sandvik has decided to acquire an 80% equity interest in Shanghai Jianshe Luqiao Machinery Co. Ltd. Jianshe Luqiao Machinery is a major player in cost-effective crushing and screening equipment solutions, has around 1 billion Swedish Kronor annual sales and about 1200 employees.

Assa Abloy has entered into a definitive agreement to acquire Nasdaq-listed LaserCard Corporation. The company will commence a tender offer to acquire all the outstanding shares. Assa Abloy offers 6.25 USD a share which is 40% above LaserCard’s Monday close. The total value of the offer is around 80 million USD. LaserCard is a leading provider of secure ID solutions. LaserCard has operations in California and in Germany. Assa’s share gained little more than 2% in the stock market today.

Debt collection services provider Intrum Justitia has bought Nice Invest Nordic AB which focuses on purchased debt in post-order and e-trading the company said in a release. The purchase price is around 290 million SEK. Intrum Justitia thus invests heavily into purchased debt in Sweden and Finland. Private equity investments firm Amanda Capital plc gained nearly 30% when it announced it is joining forces with EQ asset management group and Advium corporate finance ltd to create a strong Finnish asset manager and corporate finance advisor.

Real estate company Citycon lowered its outlook for 2010. In the October interim report Citycon that operating profit will grow 1-4% compared to 2009. Now the company says direct operating profit for 2010 will be less than in 2009. Citycon’s CEO Petri Olkinuora is leaving his position after “mutual agreement” between Mr.Olkinuora and the Board of Directors of Citycon. Citycon lost over 4% of its value in today’s trading.

Oriola-KD ran into more problems in Russia than they had expected. The company said that The operating loss of Pharmaceutical Wholesale Russia significantly decreases Oriola-KDs operating profit in 2010. This nasty surprise pushed the stock down more than 10%.

Pöyry landed a couple of contracts; a 6.9 million Euro extension from national railway company CNCF CFR SA of Romania, and an engineering, procurement and construction contract from Södra Cell Ab for a tall oil plant in Mörrum. Outotec received a 50 million Euro contract for Maaden Aluminium Project in Saudi-Arabia. ABB got a 39 million USD contract from an electricity company in Saudi-Arabia. Cencorp followed yesterday’s order news by stating that the company has finances for around a year left and is planning a 3-4 million Euro rights offer.

Vestas received three new contracts and reversed the downturn from yesterday. Hans Dalborg will retire as Chairman of Nordea at AGM 2011. If there was any doubt, Viking Line seems poised to get the governmental support it wanted in connection with the planned order of environmentally friendly cruise ferry (25.10.2010).

With questions hovering around concerning the risk-benefit profile of the humanized monoclonal antibody Motavizumab for the treatment of respiratory syncytial virus (RSV), the company has decided to discontinue the development program for this indication. This is another major setback for the company.