 | Mercer International Inc. |
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this presentation contains statements that are forward-looking, such as statements relating to results of operations and financial condition and business development activities, as well as capital spending and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements made by or on behalf of Mercer. For more information regarding these risks and uncertainties, review Mercer's filings with the Securities and Exchange Commission.
July 8, 2003
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The Issues
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- What is the Motive Behind the Dissident Proxy?
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- Independent Directors Should Not Receive Third Party Remuneration
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- Mercer is at a Critical Stage of Corporate Development
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- Mercer has High Quality Assets
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- Extensive Misleading Statements by Greenlight
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- Corporate Governance Initiatives
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- Mercer Nominees
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What Is The Motive?
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- Greenlight Have Refused Two New Independent Directors Unless They Have SOLE Veto Powers
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- Greenlight's Nominees Have No:
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- Corporate experience
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- Pulp & paper experience
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- International or European experience
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- Board-level experience at a company as complex as Mercer
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- Greenlight's Nominees are Well Compensated in Cash and Stock Options by Greenlight
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What Is The Motive? (Continued)
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- One of the Greenlight Nominees Violated U.S. Federal Securities Laws Relating to Proxy Solicitation
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- Greenlight Has Not Presented an Alternative Refinancing Plan
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- Is there a plan to impose onerous financing by Greenlight?
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Third Party Remuneration of Independent Directors
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- Raises the Question of Ultimate Loyalty
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- Mercer or Greenlight
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- Amount of Remuneration is Substantial
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- Guy Adams — $75,000 cash, 325,000 options
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- Saul Diamond — $100,000 cash, 50,000 options
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- Both Receive 100% Indemnification from Greenlight
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Mercer: A Critical Time in Development
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- Refinancing of Bridge Loans
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- €53 million maturing in October 2003
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- Refinancing put on hold due to Greenlight actions
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- Stendal Pulp Mill Project is in Mid-Construction
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- Any default on Bridge loans will trigger cross-defaults on Stendal and other debt
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Quality of Mercer Assets
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- The High Quality of Mercer's Assets are Obvious and Acknowledged by Greenlight
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- Quality will be further enhanced at completion of Stendal Project
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- To be Discussed in "Mercer's Current Status and Corporate Achievements"
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Extensive Misleading Statements By Greenlight
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- Greenlight: Mercer reshuffled Board terms.
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- Fact: Only Class III Trustees being elected.
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- Greenlight: Babington Ltd. solely controlled by Mr. Lee.
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- Fact: Babington Ltd. is a wholly owned subsidiary of Mercer.
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- Greenlight: Mr. Lee is conflicted through his MFC Merchant Bank Directorship.
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- Fact: Mr. Lee is a non-executive director with no participation in operations.
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- Greenlight: Management is responsible for poor financial results and stock performance.
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- Fact: The Company has had solid financial results and stock performance relative to its peers.
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Corporate Governance Initiatives
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- Appointment of Deloitte & Touche, LLP
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- Voluntary Adoption of Code of Business Conduct & Ethics Prior to SEC mandate
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- Adoption of New Audit Committee Charter
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- Listing on Toronto Stock Exchange
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- Engagement of Leading North American Investment Bank for Refinancing
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- Expansion of Board of Trustees by Two Independent Qualified Trustees
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Mercer's Slate: Provides Added Value
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- Per Gundersby
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- 30+ Years' Experience in European Pulp and Paper
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- Extensive Career at Jaako Poyry
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- Stendal project director
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- Michel Arnulphy
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- Trustee since 1995
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- Extensive knowledge of Mercer International
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- Proven experience with Rosenthal conversion
— Our nominees contribute relevant experience
that will benefit all shareholders. —
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Mercer's Current Status and Corporate Achievements
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Commitment To Building Shareholder Value
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- Key features of our corporate strategy include:
| | | Overview | | Example | ||||
|---|---|---|---|---|---|---|---|---|
Creating Value | X | Focus operations in grades of products where we can effectively compete | - --> - --> | NBSK Pulp Specialty Papers | ||||
Stakeholder Approach | X | Leverage synergistic relationships with: management & employees; customers & suppliers; communities & the environment; and government bodies | - --> - --> | Government guarantees and grants Environmental compliance | ||||
Pursuing Growth | X | Acquire under-performing assets and implement turn-arounds / restructurings to create shareholder value | - --> - --> | Dresden Papier 23% CAGR in production capacity post Stendal |
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Rosenthal: An Unparalleled Success
| In 1999, conversion of Rosenthal Mill to kraft pulp production created unique asset approximately €361 million invested (€101 million from grants) fastest ever start-up of an NBSK facility capacity increased from 160,000 tonnes to 300,000 tonnes Strong cost position (€312/tonne*) lowest quartile from a global delivered cost perspective |  | |
| Rosenthal Mill |
*2002 cash production costs
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Commitment to Building Shareholder Value
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- Greenlight Does Not Challenge Our Strategic Plan
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- They Note That We Have Valuable Assets
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- These Assets Exist Because of Current Management and The Board of Trustees
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The Stendal Project
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- €1 billion "greenfield" project is the largest industrial project investment in Eastern Germany
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- capacity of 552,000 t/a
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- production of saleable pulp scheduled for Q3, 2004
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- Makes Mercer one of the world's leading NBSK pulp producers
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- Strong cost position (approx. €293/tonne*)
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- Proximity to Rosenthal allows for operating synergies
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- Triple total current NBSK pulp production
*Forecast 2005 cash production cost
Stendal Mill
| Sources of Funding: | (MM) | |
|---|---|---|
| Equity | €100 | |
| Grants | €274 | |
| Project debt | €637 | |
| Other | €26 | |
| Total | €1,037 | |
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Stendal Project: A Critical Time
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- Stendal Project — Key to continued strategic development
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- Massive, complex and time consuming project that requires in-depth experience and cohesive teamwork
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- Rosenthal Conversion — Proves expertise of Management and current Board of Trustees
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- Refinancing — Key to Stendal Project
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- Completion is critical
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- Potential default on Bridge Loans if not completed
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- Other refinancing alternatives less attractive
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Stendal Project: A Critical Time
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- Now Is Not The Time To Experiment
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- Election of Two Unqualified Nominees Could Negatively Impact Stendal Project and Refinancing
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- Lack of valid experience
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- No knowledge of pulp and paper industry
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- No experience in European marketplace
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- Potential dissention within the Board of Trustees
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Proven Performance vs. Peers
EBITDA per Tonne
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Share Price Performance of Comparable Pulp Companies
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Our Position
A Vote For Mercer's Slate of Trustees is a Vote For:
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- Qualified, Seasoned Industry Veterans That Will Provide Value
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- An Efficient, Cohesive Board
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- The Continued Evolution of Our Company
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- Corporate Governance
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- Enhanced Value For ALL Shareholders
VOTE THE WHITE CARD
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| Mercer International Inc. |