JSE-listed dissolving pulp and paper-based solutions company Sappi has concluded an agreement with investment firm Aurelius to take ownership of the Maastricht mill, in the Netherlands; the Stockstadt mill, in Germany; and the Kirkniemi mill, in Finland, for an enterprise value of about €272-million.

“The decision to sell these mills follows a detailed and thorough strategic review by Sappi in line with our group Thrive25 strategic focus. This includes reducing exposure to the graphic paper segment, while expanding Sappi’s presence in segments including packaging and speciality papers, pulp and biomaterials. Recent investments across our South African, American and European operating businesses demonstrate this priority,” says Sappi CEO Steve Binnie.

“Although they no longer fit in Sappi’s portfolio, the mills are strong assets with good people,” he adds.

The consideration comprises cash proceeds and retained receivables of €212-million, as well as retained liabilities of €60-million.

The proceeds will be used to reduce debt further and continue to increase Sappi’s focus on the identified growth segments, the group points out.

The net loss after tax attributable to the net assets of the three mills for the 12 months ended March 31, 2022, was €6.5-million. Given the current volatile market conditions, the earnings before interest, taxes, depreciation and amortisation (Ebitda) for the same period for the three mills was €58-million.

By comparison, the Ebitda for the pre-Covid period – the 12 months to September 2019 – for the three mills was €40-million.

“Going forward, Sappi’s focus in Europe as regards graphic paper will be on the stronger commercial print market.

“In addition, in the packaging and specialities segment, the European business will predominantly focus on the flexible packaging, functional papers, self-adhesives including glassine, labels, as well as dye-sublimation categories,” says Sappi Europe CEO Marco Eikelenboom.

“We believe this sale will help unlock potential value at each mill, which would be best pursued by a new owner. Our strategic focus is on market segments not served by these mills,” he notes.

“The market for pulp and paper products is of particular interest to Aurelius considering our industrial sector expertise. We combine a proven record in complex carve-outs with a deep understanding of how to identify and unlock value creation potential. Given these key traits, this transaction offers ample opportunity to unleash the full potential of these production sites,” says Aurelius founding partner Dr Dirk Markus.

The Sappi Maastricht mill produces 260 000 t/y of coated wood-free paper and paperboard, mainly sold to printers and packaging converters globally.

The Stockstadt mill is an integrated pulp and paper mill, producing 145 000 t/y of pulp, which is used to produce 220 000 t/y of coated and uncoated wood-free paper, mainly sold into the European print market.

The Kirkniemi mill is an integrated pulp and paper mill, producing 300 000 t/y of bleached mechanical pulp, which is used to produce about 750 000 t/y of a variety of coated mechanical paper grades used in the print publication industry globally.

The sale is subject to various standard suspensive conditions. The sale is expected to close in the first calendar quarter of 2023 once all these conditions have been fulfilled.

A transitional services agreement will also be entered into to ensure a smooth transition of the businesses between the parties, Sappi says.