Itochu buys into Metsä Fibre

M-real Corporation (OMXH: MRLBV) is selling 7.3% of its shareholdering in Metsä Fibre Oy (formerly Metsä Botnia) to Itochu Corporation for 138 millions Euros as a part of a larger arrangement with Metsäliitto Cooperative also selling some shares to Itochu. The total value of the deal is 472 million Euros, valuing Metsä Fibre at just over 2 billion Euros.

At completion Metsäliitto Cooperative will exercise its purchase option on UPM’s (OMX: UPM1V ) 11% shareholding in Metsä Fibre. This is valued at 150 million Euros. Following transactions, which is subject to regulatory approvals, M-Real and Itochu Corporation will both have a 24.9% stake and Metsäliitto Cooperative maintains a direct majority in addition to its indirect holding via its near 40% stake in M-Real.

Metsä Fibre and Itochu enter into a commercial arrangement where Itochu will be a sales agentfor Metsä Fibre’s long fibre pulp in Asia and Metsä Fibre continues as a sales agent for Itochu’s short fibre pulp i Europe. The companies already have a long working relationship. Metsä Group’s equity ratio will improve by >4% and net gearing by some 30%.

M-Real said a part of the reasoning behind the deal was to strengthen Metsä Fibre as one of he global leaders in pulp market. Additionally the company reduces its own pulp surplus from 0.5 million annual tonnes to 0.3 million annual tonnes.

M-Real is also divesting 0.5% of its holding in Finnish energy company Pohjolan Voima Oy to Metsä Fibre for 64 million. This leaves M-Real with a 2% stake. M-Real will book a capital gain of approximately 88 million from divested Metsä Fibre shares in Q2 2012 accounts and 40 million from Pohjolan Voima sale.

In the AGM towards the end of last Month, it was decided that M-Real’s business name changes to Metsä Board Corporation to better reflect the current form of the company. Its share gained over 6% in today’s trading.