​Johannesburg Stock Exchange Sens Announcement

01 July 2013

Sappi Limited
(Registration number 1936/008963/06)
(Incorporated in the Republic of South Africa)
Share code: SAP 
ISIN: ZAE000006284); NYSE code SPP
 (“Sappi” or the “Company”)

DISPOSAL BY SAPPI OF USUTU FOREST PRODUCTS COMPANY LIMITED

INTRODUCTION
Sappi shareholders are informed that Sappi has, through its wholly-owned subsidiaries Sappi Southern Africa Limited and Brocas Limited (“the Sellers”) entered into an agreement with Montigny Investments Limited ("Montigny") in terms of which, subject to the fulfilment of certain conditions precedent, Montigny will acquire all the shares in, and the shareholder loan claim against, Usutu Forest Products Company Limited ("Usutu"), from the Sellers (“Transaction”).

DESCRIPTION OF USUTU
Usutu controls approximately 67,000 hectares of softwood plantations, a decommissioned pulp mill and two villages in close proximity to the pulp mill all located in the Kingdom of Swaziland.

BACKGROUND INFORMATION ON MONTIGNY
Montigny is registered in the Kingdom of Swaziland and carries on business within the timber industry. It supplies products to the mining industry, produces finished products for the building industry, supplies by-products to the bio-fuel, leather and charcoal industries, and produces packaging materials and poles. 

RATIONALE FOR THE TRANSACTION
Sappi evaluates its portfolio of assets on an on-going basis to ensure optimum usage and maximisation of value. Sappi’s conversion and expansion of its Ngodwana plant to produce dissolving pulp rather than bleached softwood pulp, has reduced its softwood requirements.

SALE CONSIDERATION AND USE OF PROCEEDS
The aggregate purchase price payable by Montigny to Sappi is R1 billion and will be settled in cash on closing.

The proceeds will be used for general corporate purposes and will reduce Sappi's net debt level on a pro forma basis as at 31 March 2013 to US$2,045 million.

CONDITIONS PRECEDENT
The sale of Usutu is subject to the fulfilment of a number of conditions precedent, including:

• Royal Assent from the King of Swaziland;
• Approval from the Competition Authorities in Swaziland and South Africa;
• Approval in terms of the South African Exchange Control Regulations; and
• The purchaser obtaining and furnishing the necessary guarantees in relation to the acquisition consideration to the Sellers.

PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects of the Transaction, which are the responsibility of the Sappi directors, have been prepared for illustrative purposes only and due to the nature thereof, they may not fairly represent Sappi's financial position nor the effect on future earnings after the Transaction. The unaudited pro forma financial effects assume that the Transaction has been fully implemented on 01 October 2012 for income statement purposes and 31 March 2013 for balance sheet purposes. It does not purport to be indicative of what the financial results would have been, had the Transaction been implemented on a different date.

The unaudited pro forma financial effects are presented in a manner consistent in all respects with International Financial Reporting Standards and Sappi's accounting policies as at 31 March 2013.

The pro forma adjustments to the reviewed group income statement for the half-year ended 31 March 2013 have been converted from ZAR to US Dollars using the average rate of exchange for the half-year of US$1: ZAR8.8173. The pro forma adjustments to the reviewed group balance sheet as at 31 March 2013 have been converted using Sappi's March 2013 closing rate of US$1: ZAR9.2363.

Notes:

i. The basic earnings per share, diluted earnings per share and headline earnings per share in the “Unaudited Pro forma after Transaction” column have been calculated on the basis that the Transaction was effected on 01 October 2012.

ii. The net asset value per share and the net tangible asset value per share figures in the “Unaudited Pro forma after Transaction” column have been calculated on the basis that the transaction was effected on 31 March 2013. The net asset value at 31 March 2013 of the assets that are the subject of the Transaction are US$83 million.

iii. There are no taxation consequences arising from the Transaction.

iv. The basic earnings per share, diluted earnings per share and basic headline earnings per share are calculated based on the weighted average number of shares in issue of 521.2 million shares at 31 March 2013.

v. The net asset value per share and the net tangible asset value per share have been calculated based on 521.5 million shares in issue at 31 March 2013.

EFFECTIVE DATE OF THE TRANSACTION
In terms of the agreement the closure and implementation of the Transaction is subject to the various conditions precedent described above which are anticipated to be fulfilled by 30 September 2013, but this date may be extended.
 
CLASSIFICATION OF THE TRANSACTION
The Transaction is a category 2 transaction in terms of the Listings Requirement of the JSE Limited and does not require Sappi shareholder approval.

01 July 2013
Johannesburg
Sponsor: UBS

Forward-looking statements
Certain statements in this release that are neither reported financial results nor other historical information, are forward-looking statements, including but not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends, plans or objectives. The words “believe”, “anticipate”, “expect”, “intend”, “estimate”, “plan”, “assume”, “positioned”, “will”, “may”, “should”, “risk” and other similar expressions, which are predictions of or indicate future events and future trends, which do not relate to historical matters, identify forward-looking statements. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are in some cases beyond our control and may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements (and from past results, performance or achievements). Certain factors that may cause such differences include but are not limited to:

• the highly cyclical nature of the pulp and paper industry (and the factors that contribute to such cyclicality, such as levels of demand, production capacity, production, input costs including raw material, energy and employee costs, and pricing);
• the impact on our business of the global economic downturn;
• unanticipated production disruptions (including as a result of planned or unexpected power outages);
• changes in environmental, tax and other laws and regulations;
• adverse changes in the markets for our products;
• the emergence of new technologies and changes in consumer trends including increased preferences for digital media;
• consequences of our leverage, including as a result of adverse changes in credit markets that affect our ability to raise capital when needed;
• adverse changes in the political situation and economy in the countries in which we operate or the effect of governmental efforts to address present or future economic or social problems;
• the impact of restructurings, investments, acquisitions, dispositions and other strategic initiatives (including related financing), any delays, unexpected costs or other problems experienced in connection with dispositions or with integrating acquisitions or implementing restructuring or strategic initiatives (including our announced dissolving pulp conversion projects), and achieving expected savings and synergies; and
• currency fluctuations.

We undertake no obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information or future events or circumstances or otherwise.