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Domtar enters into agreement to sell wood products business to Conifex Inc.

Domtar has announced that it has entered into an agreement to sell its forest products business to Conifex for a reported $285 million, including $50 million in working capital. The deal is expected to close before the end of the year. The proposed sale includes the Ear Falls, Nairn Centre, Timmins and White River sawmills in Ontario; the Grand-Remous, Lebel-sur-Quevillon, Malarctic, Matagami, Ste-Marie and Val-d’Or sawmills, and the Sullivan manufacturing mill, in Quebec. Also included in the deal are Domtar’s interests in a number of JVs, including the company’s ownership of Elk Lake Planing Mill, Gogama Forest Products, Nabakatuk Forest Products, Olav Haavalsrud Timber and Anthony-Domtar. It is worth noting that the company’s Saskatchewan sawmill at Big River was not included in the deal. The divested mills represent an annual sawmill capacity of approximately 1.1 Bfbm, although roughly half of the capacity is currently curtailed due to market conditions. This brings the sale price in at $259 per mfbm, which we consider a good price for Domtar given the current market conditions.

The previous is an excerpt from Salman Partners Paper & Forest Products: Weekly Industry Digest. For more information, visit www.salmanpartners.com