OSLO, Norway (AP) -- Norwegian papermaker Norsk Skog announced Monday it has sold its South Korean mills for $622 million in cash to a private equity group as part of a debt reduction program.
The buyers are Morgan Stanley Private Equity Asia and Shinhan Private Equity and they will also assume about $213 million in debt, boosting the total vale of the deal to 4.3 billion kroner ($835 million).
Norske Skog chief executive Christian Rynning-Toennesen said the sale of the South Korean business would reduce the company's net debt by about one quarter.
''This will give us more financial flexibility, and provide an improved basis for the further work to restructure the group,'' he said.
In addition to the cash payment, the buyers will assume debt and liabilities by the buyers, including a $130 million loan that is to be repaid to Norske Skog from Norske Skog Korea Co Ltd. at closing.
The transaction is expected to be completed late July or early August and includes its South Korean mills in Jeonju and Cheongwon.
Norske Skog has repeatedly announced production cuts, layoffs and restructuring over the past two years as the paper industry adapts to falling demand and prices, coupled with higher costs. In the first quarter of this year it announced a net loss of 966 million kroner ($188 million).
Norske Skog bought the Cheongwon mill in 1998. The following year, Norske Skog established the joint venture PanAsia with two other paper producers, and both Cheongwon and Jeonju became part of PanAsia. Since November 2005, Norske Skog has fully owned the activities in Korea.
The company is one of the world's largest papermakers, with 19 paper mills in 14 countries. It claims a production capacity of about 11 percent of the world's newsprint and about 5 percent of world magazine paper.