Sappi shares slump after rights discount

Sappi, the world’s top maker of fine paper used in glossy magazines such as Vogue, on Friday launched a rights share offer at a discount of 65,2%, sending its shares tumbling more than 7%.

Sappi set the rights offer price at R20,27, which compares with a closing price for Sappi’s shares of R58,25 on Thursday, the company said in a statement.

The United States-based Sappi has bid €750-million for Finland’s M-real Oyj’s loss-making graphic papers unit, and issued the rights offer to help it raise R5,8-billion for the deal.

Sappi shares sunk 7,30% to R54, underperforming the blue-chip index, which lost 0,8%.

Sappi’s acquisition of M-real’s coated graphic paper business is seen by analysts as a big step towards a long-awaited European paper industry consolidation. Analysts say Sappi can turn the loss-making graphics paper business around.

The M-real Oyj unit lost €30-million in the first half of 2008, but Sappi is aiming to reach annual synergies of €120-million over the next three years.

Sappi on Thursday reported a basic loss per share of 14 US cents compared with a profit of 33 cents in the year-ago period, due partly to one-off items, and forecast lower demand in its major markets, partly due to the global credit crunch.—Reuters