Glatfelter signs definitive agreement to acquire NewPage’s carbonless paper business

Feb 26, 2006. /Lesprom Network/. Glatfelter announced on February 22, it has signed a definitive agreement to acquire the carbonless and specialty papers business of NewPage Corporation of Dayton, Ohio. Under the terms of the agreement, Glatfelter will purchase these assets for $80 million in cash. The company said the transaction is expected to close on or about March 31, 2006. “This transaction is an exceptional opportunity to purchase world-class production assets at an attractive price and supports our vision of becoming the global supplier of choice in specialty papers and engineered products,” said George H. Glatfelter II, Glatfelter’s chairman and chief executive officer. “The acquisition leverages our strengths, creates a major increase in scale, and supports revenue and margin growth in our product lines. We expect our shareholders will benefit from a return on investment that far exceeds our cost of capital.” The company said the acquisition is expected to generate the following benefits: • Highly accretive to earnings - $0.10 - $0.15 per share in 2006 after one-time costs, $0.45 -$0.50 per share in 2007 • Revenues increase to approximately $1 billion • EBITDA to improve by over $35 million in 2007 • Valuation is highly attractive at about two times expected EBITDA improvement • Transaction price is lower than $87 million in assumed working capital “The transaction’s structure allows us to maintain a strong balance sheet with no net increase in fixed assets,” said Mr. Glatfelter. “In addition, the dramatic improvement in earnings power expected from this investment should enhance the company’s credit profile.” NewPage’s carbonless and specialty papers business is based in Chillicothe and Fremont, Ohio, and has about 1 700 employees. Estimated 2005 revenue was approximately $440 million. NewPage’s Chillicothe facility has four paper machines with capacity totaling 440 000 tonnes per year, three specialty coaters, converting operations, integrated kraft pulp mill, co-generation capability, and a research and development group. The facility in Fremont has two specialty coaters and a development team. Overall, $530 million in capital has been invested since 1990 to provide these assets with state-of-the-art production and converting capabilities. As part of the planned restructuring program, the company said it will move production from its Neenah, Wisconsin, mill to the Chillicothe facility. “The acquisition enables us to transfer Neenah’s specialty grades to Chillicothe’s highly efficient manufacturing environment and rationalize assets that are no longer competitive,” Mr. Glatfelter said. It is anticipated the Neenah mill will be permanently shut down by June 2006. The transferred products will displace the Chillicothe mill’s unprofitable commodity paper grades and enable the organization to focus on the carbonless paper business while further developing specialty papers at the facility. “We deeply appreciate the commitment and extreme efforts Neenah’s employees have made in recent years to attempt to return the mill to profitability,” said Mr. Glatfelter. “In the last few years, we have worked hard together to implement a number of aggressive initiatives to improve the mill’s productivity and competitiveness. However, forces outside of our control, such as the high costs of energy, fiber, and logistics, plus pricing pressures, have sealed the plant’s fate.” It is anticipated the company will take a $60 million - $65 million pre tax charge in 2006 in connection with the closing of the Neenah mill. Headquartered in York, Pennsylvania, Glatfelter is a global manufacturer of specialty papers and engineered products. U.S. operations include facilities in Spring Grove, Pennsylvania and Neenah, Wisconsin. International operations include facilities in Germany, France and the Philippines and a representative office in China.