UPM-Kymmene - Company Announcement

UPM to acquire Myllykoski and Rhein Papier

Transaction improves UPM's cost competitiveness and strengthens prerequisites
for print media success 

Helsinki, 2010-12-21 07:00 CET (GLOBE NEWSWIRE) -- UPM-Kymmene Corporation
Stock exchange release   21 December 2010   at 08:00 

UPM-Kymmene Corporation has entered into an agreement to acquire Myllykoski
Corporation and Rhein Papier GmbH ("Myllykoski"). The approximate enterprise
value of the businesses acquired is EUR 900 million. 

Myllykoski Corporation and Rhein Papier GmbH consist of seven publication paper
mills in Germany, Finlandand the United States. The total annual paper
production capacity is 2.8 million tonnes. In addition, Myllykoski Corporation
owns 0.8% of the Finnish energy company Pohjolan Voima Oy, with an estimated
value of EUR 70 million. Following the transaction, UPM Group's balance sheet
assets will increase by approximately EUR 1.6 billion. 

The transaction will be financed through a directed share issue of 5 million
UPM shares, with current market value of approximately EUR 60 million, and
long-term debt arrangements amounting to EUR 800 million. 

The transaction is subject to customary closing conditions, including, among
others, the approval of the regulatory authorities. Myllykoski will continue to
operate independently until the transaction will be closed. The target is to
close the transaction during the second quarter of 2011. 

The transaction is estimated to create annual synergy benefits exceeding EUR
100 million mainly from 2012 onwards. Synergy benefits will be reached for the
most part by rationalising production, logistics and sourcing as well as
reducing overlapping activities. The related restructuring and investment costs
of the combined operations are estimated to be approximately EUR 100-150
million. 

The transaction is estimated to have an immediate positive impact on UPM's cash
flow starting from the second half of 2011 and on earnings per share in 2012. 

After the completion of the transaction, UPM's gearing ratio is estimated to
rise by 8 percentage points. At the end of September 2010, the gearing ratio
was 51%. UPM will report from the transaction a one-off gain of approximately
EUR 300 million. 

UPM CEO: Combining forces is necessary

UPM's President and CEO Jussi Pesonensays that UPMis focused on improving the
cost efficiency and profitability of its European paper operations. "With this
transaction, we create the conditions needed for improving UPM's cash flow and
mid-term profitability."

Pesonen draws attention to the challenging operating environment of print
customers. "Electronic media is posing a growing challenge for the print media. Print
media has to be able to respond not only with good content but also with
excellent cost competitiveness. UPMhas confidence in the potential of the
graphic industry. Our target is to be a competitive player that is able to meet
customers' expectations.""Myllykoski is without doubt one of the leading publication paper suppliers.
The company has broad-mindedly taken advantage of new business concepts and
technologies. We recognise today's Myllykoski people as solid professionals,
who have a strongly customer oriented approach. This attitude and know-how fit
very well with UPM."

Profitability of the publication paper industry has been poor for almost ten
years already. Demand growth is shifting to markets outside of Europeand the
European industry is inefficient. "Combining forces and rationalising production is necessary for the future of
the whole industry in Europe. This means both closing unprofitable production
capacity and investments in order to increase cost efficiency," says Pesonen. "Paper is one of UPM's core businesses and our target is undisputed cost
leadership as well as growth in Chinaand other emerging markets. However, a
balanced development of the different businesses within UPMis also in our
interest. As a result of consolidation in the European paper business, we will
also have better financial resources to implement our growth plans in our other
businesses," says Jussi Pesonen. 

*UPM will give further information on the transaction in a press conference and
conference call today* 

UPM's President & CEO Jussi Pesonen and CFO Tapio Korpeinen will present the
transaction in a press conference held in Finnish at UPM Group Head Office in
Helsinki, Eteläesplanadi 2, today on Tuesday, 21 December at 09:30 Finnish
time. 

Jussi Pesonen and Tapio Korpeinen will also present the transaction in a
conference call and webcast for analysts and investors, held in English, today
at 13:00 Finnish time (11:00 London time, 06:00 EST). 

Conference call and webcast:

You can participate in the conference call either by dialling a number in the
list below or following the webcast online at www.upm.com. Only participants
who wish to ask questions in the conference call need to dial in. All
participants can view the webcast presentation online. 

We recommend that participants start dialling in 5-10 minutes beforehand to
ensure the conference starts on time. 

Conference ID: 884164

Phone numbers:
Participant - North AmericaFreephone:     +1 866 803 8344
Participant - Australia LC:     +61 (0)28 2239 540
Participant - Hong Kong LC: +852 300 278 23
Participant - Japan LC: +81 (3)45 8001 91
Participant - Malaysia LC:      +60 (0)37 7124 468
Participant - New ZealandLC: +64 (0)99 1924 15
Participant - SingaporeLC: +65 6823 2171
Participant - South KoreaLC: +82 (0)23 4831 067
Participant - Taiwan LC: +886 (0)22 1626 703
Participant - India Freephone: 000 8001 0036 74
Participant - India Freephone: 000 8001 0036 74
Participant - Austria: +43 (0)268 2205 6293
Participant - Belgium: +32 (0)2 290 14 11
Participant - Czech Republic: +420 (2)3900 0636
Participant - Denmark: +45 3271 4611
Participant - France: +33 (0)1 7099 3212
Participant - Germany: +49 (0)695 8999 0509
Participant - Hungary: +36 (0)618 8932 17
Participant - Ireland: +353 (0)1 4364 108
Participant - Italy: +39 023 0350 9005
Participant - Luxembourg: +352 2700 0734 18
Participant - Netherlands: +31 (0)20 7965 012
Participant - Norway: +47 (0)2 156 31 22
Participant - Spain: +34 917 889 897
Participant - Sweden: +46 (0)8 5052 0114
Participant - Switzerland (GE): +41 (0)2 2592 7011
Participant - Switzerland (ZH): +41 (0)434 5692 63
Participant - UK: +44 (0)207 1620 177

The webcast can be replayed at www.upm.com for 12 months.

Notes to the editor

Myllykoski

Myllykoski is a family-owned international paper group. It is one of the
largest publication paper producers in the world. The company produces uncoated
and coated publication papers, including newsprint. 

Myllykoski and Rhein Papier operate altogether seven paper mills in total with
an annual paper production capacity of 2.8 million tonnes. The mills are
located in Albbruck, Ettringen, Hûrth and Plattling (two mills) in Germany, in
Anjalankoski, Finland, and in Madison, the USA. Myllykoski employs
approximately 2,600 people, of which 1,900 are based in Germany. 

Myllykoski key figures

                                       2009  Q1-3/10
----------------------------------------------------
Volume, 1,000 tonnes                  2,505    1,841
----------------------------------------------------
Sales, EUR m                          1,571    1,056
----------------------------------------------------
EBITDA (excl. special items*), EUR m    187       47
----------------------------------------------------
EBITDA (excl. special items), %        11.9      4.5
----------------------------------------------------
* Special items 2009 include a loss on sale of the Alsip mill and a gain on
sale of the Utzenstorf mill. Special items 2010 include a gain on sale of a
hydro power plant in Madison, USA. 

UPM

UPM leads the integration of bio and forest industries into a new, sustainable
and innovation-driven future. Our products are made of renewable raw materials
and are recyclable. UPM consists of three Business Groups: Energy and pulp,
Paper, and Engineered materials. The Group employs around 23,000 people and it
has production plants in 15 countries. In 2009, UPM's sales amounted to EUR 7.7
billion. UPM's shares are listed on the Helsinki stock exchange. UPM -The
Biofore Company - www.upm.com 

UPM-Kymmene Corporation
Pirkko Harrela
Executive Vice President, Corporate Communications

UPM, Corporate Communications
Media Desk, tel. +358 40 588 3284
media@upm.com

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