With pulp prices at a 12 year high, Mercer International, Inc.’s (NASDAQ: MERC), a large global pulp producer headquartered in Canada but with facilities also in Europe, shareholders announced that they have established a committee to look into unlocking value of the company, either by sale or a joint venture with a partner. Mercer, which has seen its stock price nearly halved at 7.55 recently, off from a five-year high of 13.74, has suffered a steep earnings decline and is projecting no real relief in the coming year. Mercer, which earned 2.27 for the full year in 2006, is expected to report earnings of only 0.45 for the full year ending 2007.
While the Vancouver, B.C. headquartered company insists it is working to improve its performance, shareholders have criticized the company’s management, maintaining that investment bankers have suggested Mercer’s value is actually $11-$13 a share. The shareholders also complain that Mercer’s current board of directors is not invested in the company, so they have little incentive to improve performance. A sticking point is that Mercer’s Stendhal, Germany mill, owned by a private equity firm which runs 45% of Mercer’s production, wants to sell its shares to Mercer, but the board does not want to buy.
Mass Financial Corp. (MFCAF.PK), a Barbados company headquartered in China which owns shares in Mercer purchased through a Mercer subsidiary, has also criticized the board in a letter which claims Mercer has the wrong strategic plan in place, which Mercer disputes. The shareholders committee wants Mercer to appoint a non-conflicted investment banking firm to look into the possibilities of actions to improve Mercer’s value.
By comparison, while other large paper producers, most notably International Paper (NYSE:IP), have seen their stock prices fall due to the slump in the broader markets, they have far better earnings prospects and a healthier outlook for 2008.
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