Ahlstrom and Munksjö to Merge

Munksjö Oyj and Ahlstrom Corp., both headquartered in Finland, will merge. The combination will create a global leader in sustainable and innovative fiber-based solutions with preliminary combined annual net sales of approximately EUR 2.2 billion and adjusted EBITDA of EUR 249 million. The combined company will have approximately 6,200 employees as well as production in 14 countries.

Ahlstrom’s products are used in applications such as filters, medical fabrics, life science and diagnostics, wallcoverings, tapes, and food and beverage packaging. Munksjö produces select specialty papers. Its products are divided into four business areas—decor, release liners, industrial applications, and graphics and packaging.

The combination is expected to create significant value for the stakeholders in the combined company through stronger global growth opportunities and improved operating efficiency. The combined company's growth ambitions will be supported by a strong balance sheet and strong cash flow generation.

Annual cost synergies are estimated to be approximately EUR 35 million. The cost synergies are expected to be gradually realized over two years following completion of the combination with a more pronounced impact expected from the fourth quarter of 2017.

The combination will be implemented as a statutory absorption merger whereby Ahlstrom will be merged into Munksjö.

Ahlstrom's shareholders will receive as merger consideration 0.9738 new shares in Munksjö for each share in Ahlstrom owned by them, corresponding to an ownership in the combined company following the completion of the combination of approximately 52.8% for Munksjö shareholders and approximately 47.2% for Ahlstrom shareholders.

Munksjö and Ahlstrom propose to distribute funds in the total amount of approximately EUR 23 million each, corresponding to EUR 0.45 per share in Munksjö and EUR 0.49 per share in Ahlstrom, to their respective shareholders before the combination is completed in lieu of the companies' ordinary annual distribution.

Peter Seligson, Chairman of the Board of Munksjö, said that "After the very successful integration of our acquired businesses during the past years and strong operating performance, the combination with Ahlstrom is a natural first step in the execution of our growth strategy, combining two leading businesses into one strong engine for performance and growth. The combined company will be positioned for strong long term-financial returns partly through the significant communicated cost synergies but mainly through enhanced future competitiveness and growth opportunities."

Hans Sohlström, Chairman of the Board of Ahlstrom, said that "During the past two years the Ahlstrom management has executed a very focused and successful business turn-around by shedding costs and by focusing on commercial excellence with new products and value adding solutions for our customers. The financial results speak for themselves. The combination now enables us to directly jump into a growth mode with a much stronger balance sheet and greater earnings potential which will benefit our shareholders and our customers as well as other stakeholders. We will together be able to leverage several strategic advantages and we will focus on shareholder returns through increased profits as well as profitable global growth initiatives in the area of sustainable and innovative fiber-based solutions."

Jan Åström, president and CEO of Munksjö, noted that "Munksjö and Ahlstrom are two solid and profitable companies with strong cash flows that already today have attractive positions within their respective businesses. Together we will form an even stronger growth platform supported by the cost synergies identified but also by the added top line opportunities. The offerings and market presences are complementary, enabling us to offer our customers a broader range of solutions with a truly global reach. Our collective quality leadership, know-how, and innovation capacity will add further value to all customers. About 90% of the combined company's products are made from renewable fibers, which will be increasingly important for our sustainability ambitions and footprint going forward."

Munksjö and Ahlstrom have had a jointly operated site in Turin, Italy, since the business combination of Munksjö AB and Ahlstrom's Label and Processing business in 2013. For the past years, both companies have focused on streamlining operations and improving operational efficiency with clear results.

The combination is a natural next step in the development of the two companies as it has a strong strategic logic and is expected to improve competitiveness. The combination is also expected to increase and create new growth opportunities through the complementary customer bases, product portfolios and geographical footprints of the two companies. The companies also believe that by combining their operations they can achieve further efficiency improvements as well as benefits of scale in the capital markets in the form of increased liquidity, investor interest, and analyst coverage. 

Together, the companies will be able to serve a broad range of end-market segments with complementary product and service offerings (e.g., filtration and abrasives to the automotive industry as well as food and beverage packaging and release liners to the food and beverage industry), which creates potential for innovation within new customer-focused solutions. The two companies have complementary geographical footprints, as Munksjö has strong market positions in Europe and South America and Ahlstrom has strong market positions in Europe, North America, and Asia, which opens up new geographical growth opportunities through coordination of the product portfolios and distribution and logistics networks. 

The combination is expected to create significant value for stakeholders in the combined company through synergies resulting from the coordination of the operations of the two companies. Short to mid-term, the annual cost synergies are estimated to be approximately EUR 35 million.

The majority of the planned cost synergies are expected to be achieved through organizational streamlining, mainly within general, administrative, and sales expenses (SG&A), as well as through a focusing of central administration and a combination of administration for closely located sales offices and mills. The remaining planned cost synergies are mainly expected to be reached through coordination of purchasing and production.

The annual cost synergies are expected to be gradually realized over two years following completion of the combination. A more pronounced impact on the combined company's profitability is expected from the fourth quarter of 2017 and the cost synergies are expected to be fully realized as from the second quarter of 2019. Integration costs of approximately EUR 30 million are expected to have nonrecurring cash flow impacts from the third quarter of 2017 to the second quarter of 2018, with the majority of nonrecurring costs impacting the second and third quarters of 2017.

Munksjö's current CEO, Jan Åström, will continue to serve as the CEO of the combined company. The management team of the combined company will also include the current CFO of Munksjö, Pia Aaltonen-Forsell, and the current CFO of Ahlstrom, Sakari Ahdekivi.