Share

Wood you believe it!

When Sappi [JSE:SAP] bought four paper mills from M-real two years ago it offered lots of positive reasons for the deal. Finweek questioned the acquisition at the time and shareholder activist Theo Botha was one of the few minority shareholders to object to the transaction. The way it’s panning out, the deal now looks even more questionable.

In a transaction document at the time Sappi said: “Sappi believes that these benefits of its geographic diversity will be increased by its expansion into Finland and Switzerland and its increased presence in Germany as a result of the transaction.”

One of the former M-real mills – the Kangas mill in Finland – has already been closed. And it seems very likely the Biberist mill in Switzerland will follow next. Possibly two gone, two left – and paid for in a controversial rights issue and some additional expensive debt (that Sappi is currently restructuring to lower rates). Why did it really buy the mills?

At the time, a fund manager (who can’t be named because he was party to the deal) responded to a question about why Sappi was buying the mills with an off-the-cuff comment: “They’re buying them to close them down.” Maybe he was right.

Says Botha: “They never told shareholders they were buying the mills to close them down. After investing so much money, why is the South African company left with the capacity problem? It should have left the mills with M-real and let them close them down.”

Sappi might now be doing the right thing: the market has reacted quite favourably to its second quarter update and debt refinancing. But shareholders might be miffed. And they haven’t seen a dividend from Sappi since 2008.
We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.93
-0.1%
Rand - Pound
23.90
-0.0%
Rand - Euro
20.44
+0.1%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.1%
Platinum
906.59
+1.1%
Palladium
1,012.66
+1.1%
Gold
2,221.84
+1.2%
Silver
24.88
+1.0%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.9%
Resource 10
57,251
+2.9%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders