Mercer Acquires Celgar Pulp Mill and Related Assets

On February 14, 2005, Mercer International Inc. announced the completion of its acquisition of the Celgar pulp mill and its related assets from KPMG Inc., the receiver of all the assets and undertaking of Stone Venepal (Celgar) Pulp Inc. (KPMG) for US$225 million consisting of US$185 million cash and US$40 million in shares of Mercer. In connection with the acquisition and refinancing of approximately US$180 million of other bank indebtedness in Germany, Mercer raised US$310 million of 9.25 per cent senior unsecured notes due 2013 and US$91.5 million aggregate amount of shares at an issue price of US$8.50 per share, including the exercise and the underwriters over-allotment option. The proceeds from these offerings were raised pursuant to Mercer’s US$500 million shelf registration statement on file with the United States Securities and Exchange Commission and pursuant to concurrent offerings in Canada through the multi-jurisdictional disclosure system available for certain US issuers conducting cross-border offerings in Canada.

Mercer was represented on the acquisition by Sangra Moller LLP in Vancouver with a team led by Harj Sangra that included Kim Moller, Winston Yee, Tom Theodorakis, Lisa Gill and Shawn Poirier.

KPMG was represented by Fasken Martineau DuMoulin LLP in Vancouver with a team that included Donald Dalik, Gary Ott, Jim Piers and Randal Dhaliwal; Michael Fitch, Q.C., and Marcel Peerson handled receivership and vesting order matters. Eric DeJong and Paul Sassalos of Perkins Coie in Seattle advised on US issues.

Underwriters for the debt offering included RBC Capital Markets and Credit Suisse First Boston, who acted as joint book-running managers, and CIBC World Markets who acted as co-manager.

The underwriters for the equity offering consisted of RBC Capital Markets as lead with CIBC World Markets, Raymond James & Associates and DA Davidson & Co. forming the balance of the syndicate.

In connection with the debt and equity offerings, Mercer was represented by Sangra Moller with a team led by Harj Sangra that included Winston Yee, Stewart Muglich, Karim Lalani and Shawn Poirier. David Wilson and Jeff Shelby of Heller Ehrman White & McAuliffe LLP in Seattle were special US counsel for Mercer in connection with the financings. The underwriters were represented by Latham & Watkins LLP in Los Angeles with a team comprised of Mark Stegemoeller, Jeffrey Miller, Mayuko Abe, Dayan Rosen and Greg Pettigrew. Special Canadian counsel to the underwriters was Lawson Lundell LLP of Vancouver with a team that included Gordon Chambers and Charles Hotel.

In connection with the acquisition, the Company also arranged a US$30 million credit facility in connection with the Celgar pulp mill and a Euro 40 million credit facility in connection with the Rosenthal pulp mill. Harj Sangra and Kim Moller of Sangra Moller acted for Mercer in connection with both facilities. Special European counsel to Mercer was Ernst & Young AG of Munich, Germany, with a team led by Stefan Kugler. Lender’s counsel for the Celgar facility consisted of Doug Buchanan, Linda Parsons and Robert Groves of Davis & Company of Vancouver; and, for the Rosenthal facility, Tomas Gardfors and Tom Beckerhoff of Norton Rose of Frankfurt, Germany.