Cerberus in $2.52bn paper LBO

Cerberus Capital Management will acquire the North American operations of paper products producer Stora Enso for $2.52 billion, in one of the few mega buyouts to be signed since the advent of the credit crunch.

Cerberus Capital Management will pay $2.52 billion (€1.8 billion) for the North American holdings of Stora Enso, a paper, packaging and forest products company based in Finland, in what is the first deal north of $2 billion inked post-credit market meltdown.

Cerberus will pay $1.5 billion in cash, $200 million in vendor notes and 19.9 percent or $370 million of shares in the new company. Debt of approximately $450 million will be assumed by NewPage Holding Corporation, Cerberus' paper-related portfolio company which will merge with Stora Enso North America. 

NewPage and SENA had combined annual sales in 2006 of $4.3 billion and earnings before interest, taxes, depreciation and amortisation of $525 million. Stora Enso said in a statement that it anticipates the merger will result in value creation from significant cost synergies, which it will benefit from through its 19.9 percent stake in the new company. 

Cerberus' $7.4 billion acquisition of Chrysler this year was one of the first hit by the drying up of the credit markets this summer. As the close of the deal approached, the five investment banks underwriting the deal found themselves unable to syndicate the $20 billion of debt associated with the deal. Bear Stearns, Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley were ultimately able to sell $6 billion of the debt at 95 cents on the dollar, and Cerberus and Daimler shouldered $2 billion but had to shelve syndication on the remainder of the debt.