Helsinki, Finland 03 January 2011 -- UPM-Kymmene Corporation has entered into an agreement to acquire Myllykoski Corporation and Rhein Papier GmbH. 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, Finland, and the United States. The total annual paper production capacity is 2.8 million metric tons. 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 effect 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.