Segezha Group : agrees to acquire forestry assets in Siberia for USD 515 million

Segezha Group (MOEX: SGZH), a subsidiary of Sistema PJSFC and a leading vertically integrated holding company in the timber industry performing a full cycle of operations from logging to advanced wood processing, announces that it has agreed to acquire a 100% stake in LLC Inter Forest Rus ('Inter Forest'), which comprises 24 forest industry assets and a substantial forest resource base in the Krasnoyarsk and Irkutsk regions, for USD 515 million. [1]

As a result of the transaction Segezha Group will strengthen its position as a leading producer of sawn timber in Russia and Europe, and will become a global top-10 producer in the segment. At the same time, the Company will almost double its annual allowable cut (AAC) to 23.6 mln cu m and become one of the world's largest lease-holders of forest land with 16 mln ha of forests under management.

Transaction highlights

Inter Forest's assets include wood processing and logging enterprises, including four woodworking plants and one plywood plant, as well as a river fleet of 98 vessels. Inter Forest has an AAC of approximately 10.9 mln cu m.

Segezha Group will acquire 100% of the share capital of Inter Forest from Bonum Capital Ltd for USD 515 million.1 Segezha Group will finance the acquisition with funds from a new issue of RUB-denominated exchange-traded bonds as well as cash on hand from the Company's IPO; The transaction is expected to close in 1Q 2022 following customary regulatory and corporate approvals, as well as fulfilment of other conditions precedent agreed by the parties; The acquired assets are expected to be consolidated into Segezha Group's financial statements from 1Q 2022. Segezha Group expects a significant positive effect from the transaction from 1Q 2022. For 6M 2021, the combined businesses would have had OIBDA of from RUB 18.2 billion to RUB 19.2 billion and an OIBDA margin of approximately 31%, according to Segezha Group estimates. Segezha Group reported OIBDA of RUB 13.2 billion and an OIBDA margin of 31% for 6M 2021.

Additional details about the transaction can be found in the presentation available in the Investors section of Segezha Group's website or by following this link.

Mikhail Shamolin, President of Segezha Group, said:

'This is a transformational transaction for Segezha Group and one that will enable us to take a significant step in developing our assets. Combined with our Lesosibirsk plant and the recent consolidation of the Novoeniseisk Wood-Chemical Complex, we will be able to create a powerful Siberian cluster to complement our long-established hub in the northwest of Russia. This will enable us to expand our geographical footprint and strengthen our offering of high-value-added products to end-customers, including in the fast-growing Chinese market.

'Segezha Group will also become one of the largest lease-holders of forest land in Russia and globally. Today we are not only strengthening our competitive advantages in terms of wood self-sufficiency and cost of production - we are also taking an important step towards delivering on the promises we made at the time of our IPO to provide attractive returns for our shareholders. The investment community views forest resources as a key source of value for any forestry business. By investing in the most highly valued part of our business, we are creating a solid platform for future growth of shareholder value.'

As a result of the transaction, Segezha Group will have 16 mln ha of forests under leasehold and an AAC of 23.6 mln cu m. The Group's sawn timber production capacity will almost double to 3,221 ths cu m (+1,500 ths cu m). Pellet production capacity will grow by 1.8x to 380 ths t (+170 ths t). At the same time, the Company's plywood production capacity will increase by 35-40 ths cu m to 232 ths cu m.

The established transport infrastructure and river fleet of the acquired assets will create additional synergies for optimising raw materials supplies to Segezha Group's Siberian assets, which will ensure a high level of self-sufficiency in raw wood.

Growth of the forest resources base and the presence of developed logistical infrastructure will form the base for the future creation of Segezha East, a modern pulp-and-paper plant in Krasnoyarsk region.

Segezha Group will continue to develop its customer base thanks to Inter Forest's links with partners in Russia, China, Japan, Egypt, the CIS and Europe. The Company will focus in particular on fast-growing markets in Asia. Segezha Group estimates that the combined company may account for approximately 10% of Russian sawn timber exports to Asia,[2] and plans to further grow sales to this region going forward.

Integration of the assets will also further strengthen Segezha Group's expertise and human resources. The Company's workforce will grow by almost one-third from 13 ths to 18 ths employees. Segezha Group will expand its geographical presence to another region of Russia, the Irkutsk region.

CONFERENCE CALL AND WEBCAST

Segezha Group management will hold a conference call and webcast to discuss the transaction today, 11 October 2021, at 15:00 Moscow time (13:00 London time, 08:00 New York time).

Follow this link to participate in the webcast (Zoom)

Conference ID: 885 2587 6047

Access code: 357351

To participate in the call:

From Russia: [phone] (80)

From the UK: [phone]

From the US: [phone]

Contact:

Investors

Elena Romanova

T: [phone]

E: [e-mail]

Media

Tatiana Gorokhova

T: [phone]

E: [e-mail]

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