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17 Feb 2000
MOODY'S CONFIRMS RATINGS FOR UPM KYMMENE AND CHAMPION FOLLOWING ALL-STOCK MERGER
Moody's Investors Service has confirmed the Baa1 debt ratings for UPM Kymmene Oyj ("UPM") and Champion International Corp. ("Champion") as well as the Prime-2 commercial paper rating for Champion following today's announcement of an all-stock merger. The outlook for the ratings are stable.
Ratings confirmed are:
UPM Kymmene Oyj:
- Baa1 for the Euro MTN programme
- Baa1 for the eurobonds issued under the MTN programme
Champion International Corp.
- Baa1 for all its senior unsecured bonds, debentures, and industrial revenue bonds
- Prime-2 for its US commercial paper programme
Moody's rating confirmation reflects the consolidated group's leading global positions in writing and printing papers, the all-stock nature of the transaction, benefits accruing from greater geographic diversification, and expected synergies coming from reductions in logistical and purchasing costs, better pulp utilisation, and some product cross-selling.
The ratings also reflect the continued cyclicality expected in the cashflows of the combined group, the more leveraged balance sheet profile of Champion International, and the inevitable management challenges in integrating two very sizable groups with global operations.
UPM Kymmene and Champion have announced that they will be merging in an all stock-for-stock transaction. Champion shareholders will receive 1.99 UPM-Kymmene shares for each Champion share. The combined company will be called Champion International and will be based in Helsinki, Finland. The combined entreprise value of the group is Euro 20.5 billion and it will become the world's second largest paper and forest products group with pro-forma 1999 sales of about $ 14 billion. The transaction is pending shareholder and various regulatory approvals and is expected to close during the first half of this year.
Moody's expects the combined group to show lower cashflow volatility than each company independantly given the more diversified geographic spread with about 50 % of sales generated in Europe, 40 % generated in North America, and a further 10 % coming from Brazil and the rest of the world. Both companies have strong positions in their respective markets in writing and printing papers with UPM Kymmene already holding the position as the world's largest producer of magazine papers and the second largest European producer of uncoated fine papers and newsprint. Champion brings its strong positions in coated and uncoated papers in North America along with substantive North American timberlands, S. American pine and eucalyptus plantations, and a very low-cost integrated Brazilian producer of pulp, coated and uncoated papers.
Moody's rating confirmations assume there will be no material structural subordination issues as the group decides on its appropriate funding strategy going forward.
UPM Kymmene is a leading European forestry products company domiciled in Helsinki, Finland, with 1999 sales of ¬ 8.2 billion and operating profits of ¬ 1.5 billion. Champion International Corp. is a leading North American forestry products company domiciled in Stamford, Connecticut, with 1999 sales of $ 5.3 billion and operating profits of $ 476 million.
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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