Finnish paper company UPM said it has completed the acquisition of paper maker Myllykoski, a move analysts say is an attempt to improve sagging paper prices.
"UPM estimates that the transaction will have an immediate positive impact on cash flow and a positive impact on earnings per share from 2012," the company said in a statement late Monday.
Although the company said it also expected "annual cost synergies" of more than 100 million euros ($142 million), it has not yet detailed how the savings would emerge.
Henri Parkkinen, an analyst with Pohjola Bank, told AFP that slashing capacity to improve prices would be the priority of the deal.
"They need to shut down around a million tonnes of capacity, which will strengthen pricing in the long term," Parkkinen said, adding that overcapacity in the paper industry has severely pushed down paper prices in Europe.
Parkkinen said the deal also increases UPM's share of the European market but that even with the acquisition the company does not threaten Stora Enso's place as Europe's leading paper maker.
UPM, the world's leading magazine paper producer, announced in December its plans to acquire Myllykoski, worth 900 million euros (1.3 billion dollars). The deal was approved by the EU Commission on July 13.
UPM releases its second-quarter report on Wednesday but the Myllykoski deal is only expected to affect the bottom line in the third quarter, in the form of a one-off 40 million euro gain.