Stora Enso reported to be eyeing Anglo's Mondi

Mar 20, 2006. /Lesprom Network/. Stora Enso was considering a Ј4.5 billion takeover bid for Anglo American's paper and packaging unit, Mondi, the Sunday Times reported, citing an unidentified source close to Stora Enso. Anglo American's plan to list Mondi, its paper and packaging arm, as a separate FTSE 100 company could be derailed by an audacious Ј4.5 billion takeover offer from Stora Enso, a Finnish rival. Stora Enso is sounding out advisers about a possible bid for Mondi, although it has yet to decide to make a formal offer. No approach has been made so far to Anglo-American, the Ј30 billion mining conglomerate. “They [Stora Enso] are looking at the opportunity very carefully,” newspaper reported, citing "one person close to Stora Enso". The demerger of Mondi, which forms part of a broader restructuring at Anglo- American, is being prepared by the investment banks Goldman Sachs and UBS, and is set to take place within the next 12 months. However, sources said that Anglo-American was in effect pursuing a “dual-track” process, designed to weed out potential buyers ready to pay more than Anglo-American shareholders would gain from a separate listing of Mondi. America’s International Paper and cash-rich private-equity groups are also thought to be drawing up bids for Mondi, which is the second-biggest paper and packaging firm in Europe. Anglo-American’s decision to seek a separate listing for the paper and packaging firm follows a fall in operating profits at Mondi from $569 million (Ј324 million) to $495 million amid what it called difficult trading conditions. Tony Trahar, Anglo-American’s chief executive, has also outlined plans to sell part of its stake in Anglo Gold Ashanti of South Africa, meaning it will relinquish control of the business. He also intends to sell Highveld Steel and has appointed Citigroup to oversee the disposal. Industry analysts see further consolidation in the fragmented paper industry as inevitable. Stora Enso, which has a market value of about Ј6 billion, is pursuing its own restructuring programme, announced last October, which includes a reduction in production capacity, the sale of several mills and the loss of about 2,300 jobs. If the Finnish company does pursue a bid for Mondi, analysts suggested it would be unlikely to be interested in Mondi’s South African operations and would probably sell them on to a competitor. “The pulp and paper industry is suffering from poor profitability as the result of rising input costs, structural overcapacity and increased competition from low-cost regions,” newspaper reported, citing one analyst. “Consolidation among the larger players is the right way to address some of these challenges.” Private-equity firms already invested in the paper industry include Cinven, CVC Capital Partners and Madison Dearborn Partners, which collectively own the Irish group Smurfit Kappa.