The combined group will be the largest producer of paper and board worldwide, with total 1999 sales of around 12.4 billion euros and total paper capacity of around 15 million tonnes.

The deal is second major acquisition in less than week by a Nordic forestry and paper group of a US rival. On Thursday, Finnish paper giant UPM-Kymmene Corp agreed to buy Champion International Corp in a stock deal valued $5.81 billion.

Under terms of the latest agreement, outstanding shares of Consolidated Papers will be converted into cash or Stora Enso American Depository Receipts or a combination of cash and ADRs, with a value of $44 for each Consolidated Papers share. Each ADR will represent one Series R, or ordinary share, of Stora Enso.

The $44 a share valuation represents a premium of 69 per cent to Consolidated Papers' closing price of $26 on February 18.

The boards of both companies have unanimously approved the deal. Assuming 140 million Stora Enso R shares are issued, Consolidated Papers shareholders would receive around a 15.5 per cent stake in Stora Enso and 5 per cent of the vote. The companies said they expect pretax operating synergies of around $110 million a year, through sales and logistics optimisation and other efficiencies.

Around $90 million of the savings are expected to be realized by the end of 2001, with the full amount achieved in 2002. Stora Enso's chief executive Jukka Haermaelae said the deal is part of a strategy to expand into the North American market.

``With approximately 13 million tons of manufacturing capacity in Europe, and the integration of Stora and Enso behind us, the further development of our manufacturing base in North America is our highest priority,'' he said. ``We believe that Consolidated Papers represents an ideal strategic fit for our business. We are particularly attracted by Consolidated Papers' narrow product focus,'' Haermaelae said.

Consolidated Papers chairman George W Mead will be invited to join the board of Stora Enso. ``We believe that the future success of the business and the ability to serve our loyal customer base will be enhanced by being a central part of the North American strategy of a global company such as Stora Enso,'' Mead said in a statement.

The transaction is subject to regulatory and shareholder approval.

In early European trade, Stora Enso shares were down 8.50 kronor, or 7.5 per cent, at 104.50 kronor in Stockholm.

(The Wall Street Journal)