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Domtar and Tembec team-up to be the 2nd largest Canadian solid wood products co.

Domtar Inc. and Tembec Inc. have reached an agreement-in-principle to create a joint venture that will be equally o…

Domtar Inc. and Tembec Inc. have reached an agreement-in-principle to create a joint venture that will be equally owned by both companies.

The new company will bring together their timber and softwood (spruce, pine and fir, (SPF)) lumber operations in the provinces of Qubec and Ontario. The joint venture will also market the softwood lumber manufactured by Tembec at its SPF sawmills operations in British Columbia and by Domtar at its Lebel-sur-Quvillon, QC, sawmill.

Mr. Frank A. Dottori, president and CEO of Tembec, will be the chairman of the board of the new company, while the president and CEO of the joint venture will be Richard Garneau, Domtar’s current senior VP, Forest Products.

The new company will be comprised of the Domtar-owned or partially owned sawmills located in Chapleau, Elk Lake, Grand-Remous, Malartic, Matagami, Nairn Centre, Ste-Aurlie, Ste-Marie, Timmins, Val d’Or and White River; and Tembec-owned or partially owned sawmills located in Barn, Cochrane, Opasatika, Hearst, Kapuskasing, Kirkland Lake, La Sarre, Taschereau and Timmins. It will also include Domtar’s re-manufacturing facility in Sullivan and Tembec’s finger-jointed flange stock facility in La Sarre. All forestry operations related to these mills will also be transferred to the joint venture or managed by it. The new company will have assets valued at approximately $850 million and its pro forma net sales for 2002 total $900 million. It will have a manufacturing capacity of 2.1 billion board feet and a sales capacity of 2.6 billion board feet. Based on its sales capacity, the joint venture will be the second largest solid wood products company in Canada and the fourth largest in North America. The name of the new company as well as the location of its headquarters will be announced at the time of closing.

The transaction is subject to certain conditions, including completion of due diligence, negotiation of definitive agreements, approval of the respective boards of directors, as well as government and other required approvals. It is expected to close on or about September 30, 2003.