form6k.htm
FORM
6-K
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Report of
Foreign Private Issuer
Pursuant
to Rule 13a-16 or 15d-16
under the
Securities Exchange Act of 1934
For the
month of September, 2008
Commission
file number: 1-14872
SAPPI
LIMITED
(Translation
of registrant’s name into English)
48
Ameshoff Street
Braamfontein
Johannesburg
2001
REPUBLIC
OF SOUTH AFRICA
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F.
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Form
20-F
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X
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Form
40-F
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Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b) (1):
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b) (7):
Indicate
by check mark whether by furnishing the information contained in this Form, the
registrant is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If “Yes”
is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-
FORWARD-LOOKING
STATEMENTS
In order
to utilize the “Safe Harbor” provisions of the United States Private Securities
Litigation Reform Act of 1995 (the “Reform Act”), Sappi Limited (the “Company”)
is providing the following cautionary statement. Except for historical
information contained herein, statements contained in this Report on Form 6-K
may constitute “forward-looking statements” within the meaning of the Reform
Act. The words “believe”, “anticipate”, “expect”, “intend”, “estimate “, “plan”,
“assume”, “positioned”, “will”, “may”, “should”, “risk” and other similar
expressions which are predictions of or indicate future events and future trends
which do not relate to historical matters identify forward-looking statements.
In addition, this Report on Form 6-K may include forward-looking statements
relating to the Company’s potential exposure to various types of market risks,
such as interest rate risk, foreign exchange rate risk and commodity price risk.
Reliance should not be placed on forward-looking statements because they involve
known and unknown risks, uncertainties and other factors which are in some cases
beyond the control of the Company, together with its subsidiaries (the “Group”),
and may cause the actual results, performance or achievements of the Group to
differ materially from anticipated future results, performance or achievements
expressed or implied by such forward-looking statements (and from past results,
performance or achievements). Certain factors that may cause such differences
include but are not limited to: the highly cyclical nature of the pulp and paper
industry; pulp and paper production, production capacity, input costs including
raw material, energy and employee costs, and pricing levels in North America,
Europe, Asia and southern Africa; any major disruption in production at the
Group’s key facilities; changes in environmental, tax and other laws and
regulations; adverse changes in the markets for the Group’s products; any
delays, unexpected costs or other problems experienced with any business
acquired or to be acquired; consequences of the Group’s leverage; adverse
changes in the South African political situation and economy or the effect of
governmental efforts to address present or future economic or social problems;
and the impact of future investments, acquisitions and dispositions (including
the financing of investments and acquisitions) and any delays, unexpected costs
or other problems experienced in connection with dispositions. These and other
risks, uncertainties and factors are discussed in the Company’s Annual Report on
Form 20-F and other filings with and submissions to the Securities and Exchange
Commission, including this Report on Form 6-K. Shareholders and prospective
investors are cautioned not to place undue reliance on these forward-looking
statements. These forward-looking statements are made as of the date of the
submission of this Report on Form 6-K and are not intended to give any assurance
as to future results. The Company undertakes no obligation to publicly update or
revise any of these forward-looking statements, whether to reflect new
information or future events or circumstances or otherwise.
Attached
is the substance of the releases by Sappi Limited on September 29, 2008 and
October 2, 2008.
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Sappi
Limited
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(Reg
No 1936/008963/06)
(Incorporated
in the Republic of South Africa)
JSE
Share Code : SAP
ISIN Code
: ZAE000006284
(“Sappi”)
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This
document is not an offer of securities for sale in the United States.
Securities may not be offered or sold in the United States absent
registration with the United States Securities and Exchange Commission or
an exemption from registration. There will be no public offering of any
securities in the United States. This document is not for distribution in
the United States, Japan, Australia or Canada.
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PROPOSED
ACQUISITION BY SAPPI OF M-REAL CORPORATION’S (“M-real”) COATED GRAPHIC PAPER
BUSINESS
Sappi, a
leading producer of coated fine paper and chemical cellulose, hereby announces
that it has entered into an agreement to acquire the coated graphic paper
business of M-real (the “Acquisition”), as outlined in section 2, for Euro 750
million (US$ 1,1 billion; R 8,9 billion) (the “Purchase Consideration”). The
Acquisition will be financed through a combination of equity, assumed debt, the
cash proceeds from a rights offering and a vendor note.
M-real
has announced plans to discontinue the production of coated woodfree paper at
its Hallein and Gohrsmühle mills, located in Austria and Germany respectively
(approximately 0.6 million tons of capacity per annum).
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2.
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Description
of acquisition
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Sappi is
acquiring the know-how, brands, order books, customer lists, intellectual
property and goodwill of the coated graphic paper business (other than in
respect of M-real’s South African business) of M-real, a Finnish-domiciled
company listed on the OMX Nordic Exchange, Helsinki and a leading producer of
paperboard and paper. The business is Europe’s third and fourth largest coated
woodfree and coated magazine paper producer respectively and in 2007 it
generated revenues of Euro 1,333 million. The Acquisition also includes the
purchase of the following assets:
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i.
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Four
graphic paper mills with a total production capacity of 1,9 million tons
per annum, namely:
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the
Kirkniemi Mill in Finland which has an annual paper capacity of 740,000
tons;
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the
Kangas Mill in Finland which has an annual paper capacity of 210,000
tons;
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the
Stockstadt Mill in Germany which has an annual paper capacity of 420,000
tons, via the acquisition of 100% of the share capital of M-real
Stockstadt GmbH; and
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-
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the
Biberist Mill in Switzerland which has an annual paper capacity of 505,000
tons, via the acquisition of 100% of the share capital of M-real Biberist
AG.
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ii.
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All
of the shares in CN Papiervertriebs GmbH in
Germany.
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(together
the “Acquisition Assets”)
As part
of the Acquisition, Sappi has also entered into the following
arrangements:
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i.
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Long
term supply agreements for pulp and other services with M-real and a long
term wood supply agreement with
Metsäliitto.
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ii.
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Transitional
supply agreements with M-real for the output of Husum Mill PM8, located in
Sweden, and Äänekoski Mill PM2, located in Finland, which will both remain
under M-real’s ownership.
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The
Acquisition meets Sappi's strategic and financial criteria for acquisitions as
it enhances Sappi’s global presence, provides an opportunity to increase Sappi’s
customer base, improves Sappi’s strategic flexibility in regards to capacity
utilization, increases the range of products offered and provides anticipated
growth and cost synergies. Sappi also expects benefits from increased
profitability and returns and improved cash flows for the group.
The
Acquisition allows Sappi to strengthen its competitive position in the coated
graphic paper industry in Europe and globally. The Acquisition has been
identified as a good fit with the Sappi coated graphic paper business. Sappi’s
European production capacity is expected to increase from 2.6 million tons per
annum to 4.5 million tons per annum. The Acquisition Assets will enhance Sappi’s
position in the market by expanding its geographical footprint in Europe to
include Finland and Switzerland. Through this acquisition Sappi would
significantly increase its exposure to coated magazine paper and as a result the
combined group would be the largest coated fine paper company in Europe with
strong positions in both coated woodfree and coated magazine
grades.
In
addition, the Acquisition adds to Sappi’s product range a number of well known
brands which will complement Sappi’s existing products and provide access to an
enlarged customer base.
Furthermore,
the integration of the Acquisition with the existing Sappi operations is
expected to strengthen the profitability of Sappi's European operations through
increased coated graphic paper production, benefiting from the economies of
scale and the ability to optimise production and maximize capacity utilisation.
Other expected annual synergies coming from distribution, the integration of
sales and administration, and the rationalization of manufacturing across the
Sappi group will further enhance the performance of Sappi’s European
business.
Sappi
estimates total annual synergies of approximately Euro 120 million from the
Acquisition which should be realisable in full within three years and without
material capital investments. This synergy estimate is not a profit forecast or
a profit estimate and should not be treated as such nor relied on by
shareholders or prospective investors to calculate the likely level of profits
or losses for Sappi for the financial year ended 30 September 2008 or
beyond. This synergy estimate has not been included in the pro forma
financial effects referred to in section 6 below. The reporting of the synergy
estimate complies with the accounting policies of Sappi.
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4.
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Purchase
consideration
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The
proposed Purchase Consideration for the Acquisition is based on the cash and
debt free enterprise value of the Acquisition Assets of Euro 750
million. The Purchase Consideration will be adjusted by the deduction
of net debt and an adjustment for the difference between the target working
capital and the actual working capital at closing. The Purchase Consideration
will consist of Euro 50 million of newly issued ordinary Sappi shares (the
“Settlement Shares”), assumed debt of at least Euro 50 million, Euro 400 million
of cash paid out of the proceeds from a rights offering of Euro 450 million, and
the balance a vendor note of a maximum of Euro 250 million. The
Settlement Shares will be listed on the JSE. The price at which each Settlement
Share will be issued is Euro 7.16 (R82.39) per share,
which was determined based on the volume weighted average share price of Sappi
shares on the JSE during the 30 trading days prior to the date of this
announcement and the average Euro / Rand daily exchange rate for the same
period.
The
vendor note will be issued by a Sappi subsidiary to M-real and will be
guaranteed by Sappi and certain of its subsidiaries. It will be
repaid over a period of 48 months with an interest rate of 9% that steps up
after 6 months to 12% and steps up after 12 months to 14% and again after 18
months to 15%.
Sappi
does not expect the Acquisition to affect its Ba2/BB credit
ratings.
The
Acquisition will close on the closing of the rights offering. The effective date
for the Acquisition will be the date on which it closes.
The
Acquisition is subject to the fulfilment of a number of conditions precedent
including; inter alia,
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·
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the
Sappi shareholders, in general meeting, passing the resolutions necessary
to effect the Acquisition and the financing of the
Acquisition;
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·
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relevant
anti-trust and competition authority
approvals;
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·
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obtaining
other regulatory approvals necessary for implementing the Acquisition and
the financing of the Acquisition;
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approval
of the JSE for the listing of the Settlement Shares on the JSE;
and,
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·
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the
rights offering having closed and settled in accordance with its
terms.
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The
Acquisition will lapse if the conditions precedent have not been fulfilled or
waived by 30 April 2009 or if a rights offering has not been announced by 30
April 2009 or made by 30 June 2009.
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6.
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Pro
forma financial effects of the acquisition on
Sappi
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The
unaudited pro forma financial effects set out below have been prepared to assist
Shareholders to assess the impact of the Acquisition and financing thereof on
the EPS, HEPS, NAV and TNAV per share of Sappi. These pro forma financial
effects illustrate how the Acquisition might affect the reported financial
information of Sappi if the completion date of the Acquisiton had occurred on 30
June 2008 for balance sheet purposes and on 1 October 2006 (for the twelve
months ended September 2007) and 1 October 2007 (for the nine months ended 30
June 2008) for income statement purposes.
The pro
forma financial effects have been prepared in accordance with the Listings
Requirements of the JSE and the Guide on Pro Forma Financial Information issued
by The South African Institute of Chartered Accountants. These unaudited pro
forma financial effects are the responsibility of the Board and are provided for
illustrative purposes only. The material assumptions on which the pro forma
financial effects are based are set out in the notes following the
table.
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Pro
forma information as at 30 June 2008
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Sappi
as reported as at 30 June 2008
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Pro
Forma as at 30 June 2008
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US$
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US$
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Net
asset value per share
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7.29
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8.04
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Net
tangible asset value per share
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7.25
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7.53
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Ordinary
shares in issue (millions)
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229.1
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302.1
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Weighted
average number of ordinary shares in issue (millions)
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228.7
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301.7
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Pro
forma information for the nine months ended June 2008
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Sappi
as reported for nine months ended June 2008
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Pro
Forma for the nine months ended June 2008
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US
cents
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US
cents
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Earnings
per share
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59
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62
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Headline
earnings per share
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58
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18
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Ordinary
shares in issue (millions)
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229.1
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302.1
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Weighted
average number of ordinary shares in issue (millions)
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228.7
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301.7
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Pro-forma
information for the twelve months ended September 2007
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Sappi
as reported for twelve months ended September 2007
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Pro
Forma for the twelve months ended September 2007
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US
cents
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US
cents
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Earnings
per share
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89
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98
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Headline
earnings per share
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82
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51
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Ordinary
shares in issue (millions)
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228.5
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301.5
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Weighted
average number of ordinary shares in issue (millions)
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227.8
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300.8
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Notes
and assumptions
1.
The pro forma financial effects reflect the Acquisition and related financing as
outlined in section 4.
2. The
number of shares in issue and the weighted average number of shares have been
adjusted by 73 million shares representing the number of shares to be issued as
consideration for the Acquired Assets and the proposed rights offering of
Euro 450 million. The number of Settlement Shares has been determined by
reference to the volume weighted average share price of Sappi shares on the JSE
during the 30 trading days prior to the date of this announcement. The number of
rights offering shares was calculated using the Sappi closing share price at 26
September 2008 of R81.50. The actual number of shares issued will be based on
the relevant variable components of the financing and of the relevant agreements
and, accordingly, the number of shares will change.
3.
The pro forma financial effects exclude:
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·
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anticipated
synergies from the Acquisition;
and
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·
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movements
in the US Dollar / Euro exchange
rate.
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4.
Financial information for the Acquired Assets has been extracted from the
financial statements for the Acquired Assets provided to Sappi by
M-real. These financial statements have been prepared on a full
carve-out basis in accordance with IFRS as issued by the IASB and are presented
in Euros. Such financial information has been converted from Euros to
US Dollars for the income statement, using the average exchange rate for the
year ended 31 December 2007 of EUR1 to US$1.3755, the three months ended 31
December 2007 of EUR1 to US$1.4556, for the six months ended June 2008 of EUR1
to US$1.5315 and for the balance sheet as at 30 June 2008 using the period end
rate of EUR1 to US$1.5795.
5.
The allocation of the Purchase Consideration reflected in the pro forma
financial effects is preliminary based on estimated fair values and the
estimated Purchase Consideration. It will eventually be adjusted
based on a complete assessment of the fair value of the net Assets Acquired and
the final Purchase Consideration. The final Purchase Consideration allocation is
dependent on, among other things, the finalisation of asset and liability
valuations. Any final adjustment will change the allocations of the Purchase
Consideration, which will affect the fair value assigned to the assets and
liabilities and could result in a material change to the pro forma financial
effects, including a change to goodwill.
6.
The pro forma financial effects are presented for information purposes only, and
do not purport to represent what Sappi’s actual results of operations or
financial condition would have been had the Acquisition and financing occurred
on the dates indicated, nor are they necessarily indicative of future results of
operations or financial condition.
7. The
pro forma headline earnings per share for the nine months ended June 2008 and
the twelve months ended September 2007 exclude a net asset impairment reversal
of EUR 111 million recorded by M-real. The impact thereof for the nine months
ended June 2008 and the twelve months ended September 2007 is 51 US cents and 54
US cents respectively.
Allan
Gray Limited and RMB Asset Management (Proprietary) Limited which both currently
act as investment managers for clients holding, in aggregate, approximately 34%
of Sappi's issued ordinary shares, have agreed to vote the shares over which
they have voting rights (representing, in aggregate, approximately 10% of
Sappi’s issued ordinary shares) in favour of the resolutions required to
implement the Acquisition and the financing of the Acquisition and to recommend
to their clients having the voting rights over the remaining shares
(representing, in aggregate, approximately 24% of Sappi’s issued ordinary
shares) to vote in favour of such resolutions.
8.
Further announcements
Sappi
shareholders will be notified of progress in the fulfilment of the conditions
precedent.
9.
Category 1 Circular
The
Acquisition will be a Category 1 transaction in terms of the JSE’s Listings
Requirements. Accordingly, a circular to Sappi shareholders
containing, inter alia,
all information pertaining to the Acquisition, as is required in terms of the
JSE’s Listings Requirements, and a Notice of General Meeting containing all
resolutions proposed to be passed by Sappi shareholders is expected to be posted
to shareholders on or about 7 October 2008.
10.
Forward looking statements
Certain
statements in this release that are neither reported financial results nor other
historical information, are forward-looking statements, including but not
limited to statements that are predictions of or indicate future earnings,
savings, synergies, events, trends, plans or objectives. Undue reliance should
not be placed on such statements because, by their nature, they are subject to
known and unknown risks and uncertainties and can be affected by other factors,
that could cause actual results and company plans and objectives to differ
materially from those expressed or implied in the forward-looking statements (or
from past results). Such risks, uncertainties and factors include,
but are not limited to, the
risk that the Acquired Business will not be integrated successfully or
such integration may be more difficult, time-consuming or costly than expected,
expected revenue synergies and cost savings from the Acquisition may not be
fully realized or realized within the expected time frame, revenues following
the Acquisition may be lower than expected, any anticipated benefits from the
consolidation of the European paper business may not be achieved, the ability to
obtain governmental or regulatory approvals of the Acquisition on the proposed
terms and schedule, the failure of shareholders of Sappi to approve the
Acquisition or the related financings, the highly cyclical nature of
the pulp and paper
industry
(and the factors that contribute to such cyclicality, such as levels of demand,
production capacity, production and pricing), adverse changes in the markets for
the group's products, consequences of substantial leverage, changing regulatory
requirements, unanticipated production disruptions, economic and political
conditions in international markets, the impact of investments, Acquisitions and
dispositions (including related financing), any delays, unexpected costs or
other problems experienced with integrating acquisitions and achieving expected
savings and synergies and currency fluctuations. The company
undertakes no obligation to publicly update or revise any of these forward-
looking statements, whether to reflect new information or future events or
circumstances or otherwise. Morgan Stanley & Co. Ltd in conjunction with one
or more of its affiliates (“Morgan Stanley”) is acting for Sappi in connection
with this Acquisition and no one else and will not be responsible to anyone
other than Sappi for providing the protections offered to clients of Morgan
Stanley nor for providing advice in relation to this Acquisition.
Johannesburg
29
September, 2008
This
document is not an offer of securities for sale in the United States. Securities
may not be offered or sold in the United States absent registration with the
United States Securities and Exchange Commission or an exemption from
registration. There will be no public offering of any securities in the United
States. This document is not for distribution in the United States, Japan,
Australia or Canada.
SAP -
Sappi Limited - ERRATA IN CONDITIONS PRECEDENT SECTION OF ANNOUNCEMENT PUBLISHED
ON SENS AND IN THE SOUTH AFRICAN PRESS
Sappi
Limited
(Reg No
1936/008963/06)
(Incorporated
in the Republic of South Africa)
JSE Share
Code: SAP
ISIN
Code: ZAE000006284
("Sappi")
ERRATA
IN CONDITIONS PRECEDENT SECTION OF ANNOUNCEMENT PUBLISHED ON SENS
AND IN THE SOUTH AFRICAN PRESS
Shareholders
of Sappi are referred to the Conditions Precedent from the
announcement regarding the Proposed Acquisition by Sappi of M-real
Corporation's coated graphic paper business
published on SENS dated 29 September 2008, the Business Day
dated 01 October 2008 and the Beeld dated 01 October 2008, wherein the
dates whereby the Acquisition will lapse were erroneously stated. Accordingly,
shareholders are advised to disregard the previous statement and note that the
Acquisition will automatically lapse if the rights offering has not been
announced by 28 February 2009 or, if announced by that time, if it has not
closed and settled by 30 April 2009.
Johannesburg
2 October
2008
Sponsor
UBS South
Africa (Pty) Ltd
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: September 29,
2008
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SAPPI
LIMITED |
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By:
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/s/
D.J.
O’Connor |
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Name: D.J.
O’Connor |
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Title:
Group Secretary |
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