Koskisen aims to achieve synergies in both units by acquiring Iisveden Metsä

Translation: Original published in Finnish on 03/11/2025 at 07:00 am EET

In our opinion, the acquisition of Iisveden Metsä and the expanding wood procurement support Koskisen’s growth strategy and the Sawn Timber Industry. We consider the valuation of the transaction fairly neutral in the outset, so in Koskinen's scale, we believe the value creation of this medium-sized arrangement relies especially on the synergies arising from the growth of both businesses. We are adding Iisveden Metsä to Koskisen's estimates after the presumably H1 closing of the deal is confirmed. 

Koskisen buys the business operations of Iisveden Metsä 

Koskisen announced yesterday that the company has agreed to acquire the business operations of Iisveden Metsä. Located in Suonenjoki, Iisveden Metsä is a limited company mainly owned by private individuals and it produces some 140,000 m³ of spruce sawn timber per year. 

The transaction will be carried out as a business acquisition, including, with certain limited exceptions, the entire business of Iisveden Metsä, including the factory property located in Suonenjoki with machinery and equipment, as well as inventories. The personnel of Iisveden Metsä, approximately 50 people, will be transferred to Koskisen as old employees. The transferred business does not include the target company’s receivables, cash and cash equivalents or other financial assets or liabilities.

The revenue of Iisveden Metsä (unaudited) in 2024 was 52.7 MEUR (2023: 52.5 MEUR) and EBITDA in 2024 was 1.4 MEUR (2023: 0.5 MEUR). The book value of transferred balance sheet items at the end of 2024 was around 24.9 MEUR (unaudited).

If realized, the arrangement will increase Koskisen's revenue and EBITDA. The transaction is expected to create synergies in raw material sourcing, especially for birch logs, thus supporting the organic growth and profitability of the Panel Industry.  The transaction will also have positive effects on the production efficiency and the optimization of market-specific concepts of the Sawn Timber Industry. The completion of the transaction is currently not expected to have an impact on Koskisen’s guidance for 2025.

The debt-free purchase price of 22.5 MEUR will be paid in cash and shares 

The debt-free purchase price of the business transaction is 22.5 MEUR. Its cash portion will be adjusted at the time of closing with a net working capital adjustment, which is not expected to be significant. In addition, Koskisen will pay the seller a maximum earnout of 4 MEUR if the conditions specified for the payment of the earnout, mainly related to sales price of sawn timber, are met during 2025-2027. Any earnout price will be paid during the first half of 2028.

The purchase price will be paid partly in new Koskisen shares and partly in cash upon the completion of the transaction. In the share issue directed to the seller, Iisveden Metsä Oy, 1,000,000 new Koskisen shares, corresponding to approximately 4.3% of all the shares of Koskisen, will be transferred to the seller as consideration shares as part of the purchase price. The subscription price of the consideration share in the transaction is EUR 7.3 per share. The subscription price has been determined based on the negotiations between Koskisen and Iisveden Metsä and considers the volume-weighted average price of Koskisen’s share before signing of the transaction.  

If the consideration shares are not entitled to dividend in 2025, the amount of dividend per share possibly resolved by the General Meeting will be deducted from the subscription price of the consideration share and added to the cash portion of the purchase price. The cash consideration of the purchase price to be paid at completion of the transaction, estimated at approximately 15.2 MEUR is financed using Koskisen’s existing cash and cash equivalents.  Any earnout will be paid in cash. Iisveden Metsä is committed to a transfer restriction for 15 months from the completion of the transaction.

The completion of the transaction requires the approval of Finnish and Estonian competition authorities, approval by a qualified majority at the Annual General Meeting of Iisveden Metsä and the fulfilment of certain other ordinary closing conditions. Koskisen expects the transaction to be completed during H1’25.

We feel that Iisveden Metsä is a good fit for Koskisen 

We consider the deal medium-sized from Koskisen's perspective, as it will increase the company's sawing capacity by about a third and the Group's revenue by good 15%. The acquisition was not a surprise, as inorganic growth is part of Koskisen's growth strategy, and the revenue target of 500 MEUR set for 2027 requires significant inorganic growth from the company (cf. 2024 revenue 282 MEUR). The acquisition of Iisveden Metsä is Koskisen’s first acquisition as a listed company. The acquisition target was also not a significant surprise, as we expected Koskisen to seek a synergistic acquisition in Finland, especially to strengthen wood procurement. 

We feel the acquisition of Iisveden Metsä fits these criteria well, as the company will be able to expand its wood procurement regionally to Savo, which also enables it to increase the procurement volume of birch logs. The increase in birch log procurement, in turn, enables the company to increase its birch plywood production in Järvelä, where Koskisen recently started a multi-year investment program. In addition, Iisveden Metsä increases Koskisen's capacity and optimization opportunities in high-quality spruce sawn timber, which is the company's key product group in the Sawn Timber Industry. We do not believe that the arrangement will bring significant quick cost synergies, as the overlaps between the companies seem limited. 

We find the valuation neutral and value creation calls for synergies

The purchase price corresponds to an EV/S ratio of 0.5x and an EV/EBITDA ratio of 15x for Iisveden Metsä's actual 2024 earnings before the earnout. Correspondingly, the EV/S ratio calculated from the average revenue of the last 6 years is 0.5x and the EV/EBITDA ratio calculated from the average adjusted EBITDA is about 5x before the earnout. The P/NAV ratio calculated from deferred tax assets is about 0.9x before the earnout. Last year's earnings multiples are high due to Iisveden Metsä's weak earnings, while the longer-term trailing multiple (including the very high earnings in 2021) is roughly in line with the range we accept for Koskisen (EV/EBITDA 4x-7x). The balance sheet multiple is slightly lower than Koskinen’s P/B ratio (2024 actualized 1.1x). 

Therefore, we consider the valuation of the transaction (incl. the share price of the share component roughly in line with our target price) to be somewhat neutral for Koskisen, and the value creation of the transaction relies especially on the scale of synergies. Koskisen has not yet disclosed its synergy target, but we estimate that the target for synergies, mainly from the commercial side, is several million euros, but their full realization will take several years (incl. completion of the investment program in the Panel Industry). In addition, the arrangement slightly increases Koskisen's exposure to the Sawn Timber Industry, which is more cyclical than the Panel Industry (incl. leverage from the recovery of the current weak sawmill cycle in the coming years), but we do not consider the change to be significant on the company's scale. 

We are fairly neutral about the transaction for the time being

For the time being, we consider the transaction neutral from a valuation point of view, given the uncertainty related to synergies, while strategically the deal seems quite promising from Koskisen's perspective. We will include the acquisition of Iisveden Metsä in Koskisen's estimates after the transaction is completed. Due to the fragmented nature of the sawmill industry, we do not expect the competition authorities to create a risk for the completion of the transaction. In our view, the approval of the transaction by the AGM of Iisveden Metsä is also very likely.