On 23 June, Norske Skog announced that the company had entered into an agreement to sell the wholly owned subsidiary Norske Skog Korea to Morgan Stanley Private Equity Asia and Shinhan Private Equity. The transaction comprises the two newsprint mills Jeonju and Cheongwon, and is part of the work to reduce Norske Skog’s net debt.
Completion of the transaction was contingent upon approval from Korean competition authorities, consent from certain of Norske Skog’s lenders as well as other customary conditions. Norske Skog and the buyers have now agreed that all conditions precedent for the closing of the transaction have been satisfied.
The parties have agreed to amend the cash consideration from NOK 3.2 billion (KRW 643.3 bn) to NOK 3.1 billion (KRW 620 bn). As previously announced, a USD 130 million inter-company loan will be repaid to Norske Skog from Norske Skog Korea Co Ltd. at closing. Local liabilities remain with Norske Skog Korea Co Ltd.
In Korea, it is customary for the seller of a business to offer a payment to the employees in connection with such transactions. The compensation agreed with the employees of Norske Skog Korea is higher than first assumed.
Following from the above, as well as changes in currency rates and other adjustment factors, the transaction will reduce the net debt of Norske Skog to pro forma NOK 12.0 bn from NOK 15.7 bn as of 30 June 2008. The gearing will be reduced to pro forma 0.83 from 1.07 as of 30 June.
Closing of the transaction has been agreed for the week commencing 8 September.