MercoPress. South Atlantic News Agency

Leading paper maker privileges control of Botnia mill in Uruguay

The huge plant built at a cost of 1.2 billion USD

Finnish paper firm UPM-Kymmene Corp. said Wednesday that it plans to take over the Fray Bentos pulp mill and forest plantations in Uruguay from Finnish forest co-operative Metsaliitto Group in an asset-swap arrangement.

Under a preliminary deal, UPM - the world's largest magazine paper maker - will gain sole ownership of the Fray Bentos eucalyptus pulp mill, which is currently owned and operated by UPM and Metsaliitto's joint venture Metsa-Botnia Oy.

In return, UPM will sell some of its shares in Metsa-Botnia to Metsaliitto, cutting its stake in the company to 17% from 47%.

After the swap, Metsaliitto will hold 53% of the shares in Metsa-Botnia. The remaining shares are owned by Metsaliitto's subsidiary M-Real.

The arrangement also includes transferring Metsa-Botnia's ownership in the Uruguayan eucalyptus plantation company Forestal Oriental to UPM.

UPM Chief Executive Jussi Pesonen said in a statement the deal will strengthen UPM's position in emerging markets and substantially boost its pulp production capacity. At the same time, the company is cutting its pulp output at its home base in Finland.

Assuming the debts of the Uruguayan operations, UPM said its debt will rise by an estimated 560 million US dollars due to the transaction, expected to be closed by end-2009.

Constructed at the cost of 1.2 billion USD, the Fray Bentos pulp mill - located just off the border with Argentina in western Uruguay - started production in November 2007.