Stora Enso to acquire Estonian sawmills

The Finnish wood products company Stora Enso Timber said last week it had signed a letter of intent to acquire a majority stake in AS Sylvester, Estonia's largest sawmill company, for an undisclosed sum.

The acquisition by Stora Enso Timber would add 900,000 cubic meters of annual sawmill capacity, taking its total to some 6.5 million cubic meters, making it the clear leader in Europe.

"The Baltic states are a major emerging source and market for competitive high-quality wood products, and an important area for wood raw material procurement," Arno Pelkonen, Stora Enso Timber senior executive vice president, said in a statement released in Tallinn.

Stora Enso Timber will acquire 66 percent of the outstanding shares of the sawmill operations and 100 percent of the wood procurement operations of AS Sylvester.

The deal was reportedly made for between 1 billion (63.9 million euros) and 2 billion kroons, which if true is far lower than the 4 billion kroons Hansapank analysts estimate the company is worth.

The Baltic News Service later quoted Pelkonen as saying Stora Enso would later acquire the remaining 34 percent of the sawmill operations as part of the deal.

Sylvester has five mills located in Estonia and Latvia.

The deal provides a platform for further growth, including a commitment to build three more sawmills in Latvia, Lithuania and the Pskov region in Russia over the next few years, Stora Enso Timber said.

The deal has left competitors scratching their heads.

"I'm very much interested in why they sold Sylvestor," said Rein Kilk, who owns the Sakala Sawmill. "It's suprising that the sell-off came so suddenly."

Its parent, Stora Enso Oyg, reported net profits of 299 million euros in the first half of 2002, a 31.8 percent drop from last year, while turnover slid by 7.7 percent to 6.464 billion euros.

AS Sylvester posted net sales of 160 million euros last year.