Ahlstrom Corporation has today signed an amendment agreement with EQT, the principal owner of Munksjö, related to the proposed combination of Ahlstrom's Label and Processing business area and Munksjö AB, to create Munksjö Oyj, a leading manufacturer of specialty papers. The amendment agreement covers an additional equity investment in Munksjö Oyj and the net debt position of Ahlstrom's Label and Processing business in Europe (LP Europe) and Munksjö AB as per March 31, 2013. The agreement also details the consequences of the commitments that Ahlstrom and Munksjö AB have provided to address the competitive concerns of the European Commission with respect to the abrasive backings and pre-impregnated decor paper businesses that are part of the planned combination.
To strengthen the balance sheet and to address the consequences of the remedy proposal made to the EU Commission, the parties have agreed to make an equity investment in the new Munksjö Oyj totalling approximately EUR 28.5 million, in addition to the previously agreed EUR 100 million. The equity investment will be made by Ahlstrom, EQT and the shareholders of Munksjö AB through Munksjö AB. Ahlstrom has increased its original commitment by EUR 16.0 million to EUR 78.5 million and EQT has increased its original commitment by EUR 1.0 million to EUR 13.5 million by subscribing and paying for additional new shares in Munksjö Oyj. Munksjö AB's commitment amounts to EUR 11.5 million.
Based on the net debt determination of LP Europe as per March 31, 2013, Ahlstrom will receive EUR 151.5 million related to a net debt transfer to Munksjö Oyj in connection with the completion of the LP Europe part of the combination. Further, it has been agreed that Munksjö AB's shareholders, based on the net debt determination of Munksjö as per March 31, 2013, will receive a net debt related compensation amounting to EUR 11.5 million, which the shareholders intend to use for the equity investment in the new Munksjö Oyj, committed to by Munksjö AB as mentioned above.
As a consequence of the commitments that Ahlstrom and Munksjö AB have provided to the European Commission, the parties have agreed that Ahlstrom will purchase back all the shares in Ahlstrom Osnabrück GmbH in Germany from Munksjö Oyj at an enterprise value of EUR 48 million immediately after the LP Europe completion has occurred. The abrasive backings and pre-impregnated decor paper businesses will then be divested to a third party.
The commitments to the European Commission will affect the expected synergies of the combination of Ahlstrom's Label and Processing business area and Munksjö AB by approximately EUR 5 million annually. Consequently, the combination is expected to create savings for Munksjö Oyj through synergies and efficiency improvements in the range of EUR 20-25 million annually. Of the identified synergies, a run-rate of about 60 per cent is expected to be achieved within 12 months following the LP Europe completion and the rest during the following two years. Total costs to achieve these synergies are estimated to be EUR 10-15 million in cash, of which approximately EUR 6 million is expected to be incurred during the first 12 months and the remainder during the following two years. In addition to the synergies, further annual cost improvements of approximately EUR 10-15 million are expected related to standalone cost savings.
The LP Europe Completion is expected to take place on or before May 27, 2013, provided that the relevant competition clearances, e.g. from the European Commission, are obtained prior to that.