South Africans buy US paper maker

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SAPPI, a South African paper company, has joined forces with financial institutions to pay dollars 1.6bn ( pounds 1.1bn) for SD Warren, the largest producer of coated wood- free papers in the US, writes Alison Eadie.

The acquisition is the largest by a South African company in the US and makes Sappi world leader in coated wood-free papers, which are used in top-quality glossy magazines.

The deal was financed internationally against the security of Sappi's European assets without a cent leaving South Africa.

Bill Hewitt, finance director, said: 'Because of the constraints on the balance of payments account, the authorities are reluctant to give permission to South African corporations to take funds out of South Africa to make purchases abroad.'

The other investors are DLJ Merchant Banking Partners, owned by Donaldson, Lufkin & Jenrette, the Wall Street securities firm, and UBS Capital Corporation, owned by Union Bank of Switzerland.

Sappi's European assets include Saiccor, the dissolving pulp plant bought from Courtaulds in 1988, five paper mills in Britain acquired in 1990 and Hannover Papier in Germany, bought in 1992.

The acquisition of Warren will be financed by a stand- alone leverage transaction. Sappi will invest dollars 250m for 70 per cent of Warren. The remaining equity capital will come from DLJ (dollars 125m) and UBS (dollars 25m).