M-Real Sells 4 Paper Mills For $1.1B

Finland’s No. 3 paper producer said it will sell four paper mills for $1.1 billion to South Africa's Sappi Ltd.

HELSINKI, Finland (AP) -- Shares in M-Real Oyj surged Monday after the Finnish paper company said it will sell four paper mills for 750 million euros ($1.1 billion) to South Africa's Sappi Ltd.

Finland's No. 3 paper producer said the deal includes its entire graphic paper unit and that it will now focus on packaging board production.

The Espoo-based company has for years tried to improve the profitability of its troubled graphic paper unit, which has struggled against industry overcapacity and decreasing global prices for fine paper.

The mills that are being sold are the Kirkniemi and Kankaa mills in Finland, the Stockstadt mill in Germany and the Biberist mill in Switzerland. In total, the four mills provide annual production capacity of 1.9 million metric tons of coated fine paper, which is used mainly in advertising and magazine publishing, M-Real said in a statement.

The sale is expected to be completed during the first quarter of 2009.

The company also said it is planning to cut its coated fine paper production by a further 600,000 metric tons through ceasing production at the Austrian Hallein mill in Austria and Gohrsmuhle mills in Germany.

Earlier this month, its Finnish peers UPM-Kymmene Corp. and Stora Enso Oyj announced substantial layoffs and plant closures in an effort to restructure the European paper industry that is suffering from serious overcapacity.

The two companies, which are among the world's largest paper makers, said they were particularly hurt by high raw material costs, a strong euro and a global economic downturn.

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