Canfor Corporation announced Monday that it has signed an agreement to acquire Tembec’s southern British Columbia interior wood products assets, for a purchase price including working capital of $60 million.
This could be significant because, until now and except for its sawmills at Vavenby and Radium, Canfor’s B.C. operations have largely been concentrated in the northern part of the province.
Canfor will purchase Tembec’s Elko and Canal Flats sawmills and approximately 1.1 million cubic meters of combined Crown, private land and contract annual allowable cut. The transaction will include a long-term agreement to provide residual fiber supply for Tembec’s Skookumchuck mill.
“This acquisition is a key step in our ongoing approach to strengthening Canfor’s fiber position in B.C. and deepens our ability to meet the needs of our valued global customers” said Canfor president and CEO Don Kayne.
Over the next few years, Canfor intends to make capital investments in excess of $50 million to enhance productivity and cost performance in its B.C. southern Interior mill facilities. The Elko and Canal Flats mills will provide an additional 420 million board feet to Canfor’s annual capacity, bringing Canfor’s total capacity in North America to greater than 5 billion board feet.
“Canfor is not only acquiring mills and fiber supply in this agreement, but also a talented employee and contractor group” said Kayne. “We expect to continue Tembec’s legacy of strong community and First Nations relationships. Canfor is readying itself to supply the growing demand from Asia Pacific markets that we, the province of British Columbia and the government of Canada have worked so hard to build, as well as key strategic customers in North America. Our decision to make a significant new investment in B.C. is premised on the province’s stable, cost-conscious policy environment and exceptional commitment to market development.”
Canfor expects to engage with the Forest Stewardship Council in relation to maintaining FSC certification of the forest tenures. When that process is complete, the company will have fiber certified to all three major North American forest certification systems, including the Canadian Standards Association, Sustainable Forestry Initiative and Forest Stewardship Council. This supply diversity strengthens Canfor’s position as one of the world’s leading suppliers of green building products.
“This transaction is an important step in the ongoing reshaping of our business portfolio and geographical footprint to maximize shareholder value, while remaining committed to the lumber business,” stated Tembec president and chief executive officer James Lopez.
“We are very pleased to be selling this part of our business to Canfor, a company with such a long-standing reputation in the industry. Under the leadership of president and CEO Don Kayne, Canfor is well known for its significant capital investment programs and we feel that Elko and Canal Flats sawmills will greatly benefit from joining this well-managed company.”
Approximately 455 employees are included in the transaction. The Elko and Canal Flats sawmills employ some 165 people on each site. The remaining employees include 33 forest management workers and roughly 90 staff located in Cranbrook head office and associated Tembec field sites.
Tembec acquired the Elko and Canal Flats sawmills in 1999 as part of the acquisition of Crestbrook Forest Industries Ltd. Tembec also operates two other plants in British Columbia: a NBSK pulp mill in Skookumchuck, which employs 280 people, and a high-yield pulp mill in Chetwynd, which employs 140 people. These operations will not be affected by the contemplated transaction.
The transaction with Tembec is subject to various customary closing conditions including regulatory approval and is expected to complete late in the first quarter of 2012.