Stora of Sweden and Enso of Finland yesterday confirmed they are to merge in an $8.5 billion deal to create the world's largest pulp and paper maker.
The tie-up between the world's fourth and fifth largest volume producers of paper and board establishes a group with output of more than 13 million tonnes of paper products a year and joint turnover of 90 billion Swedish krona (£11.5 billion).
It follows more than four months of talks between the Finnish government, Enso's largest shareholder, and Investor, the main investment vehicle of the Wallenberg business empire and the largest shareholder in Stora.
The transaction will require approval from the European Commission. Analysts said a possible stumbling block could be the new company's dominance in drinks packaging production, where it would be by far the continent's biggest supplier, with a market share of close to 70 per cent.
Mr Percy Barnevik, Investor chairman, said the enlarged company - to be called Stora Enso - would be better placed to exploit international expansion opportunities. "This industry is very fragmented and now you will get considerably more consolidation coming through," he added.
Analysts hailed the merger, predicting it would spur an upwards re-rating of the deeply cyclical forestry sector in Europe.
The deal would generate SKr1.9 billion of annual cost-savings and synergy benefits by 2002, the companies said. Stora shareholders will own 60 per cent of the enlarged group's equity, with Enso shareholders taking the balance. The Finnish government will see its near 47 per cent voting rights in Enso diluted to 21 per cent and it will hold 18 per cent of the equity.
