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Cascades releases further details on Orchids Paper acquisition

July 2, 2019  Cascades has provided additional information on its acquisition of Orchids Paper Products Company following the approval of the transaction by the United States Bankruptcy Court for the District of Delaware.

Cascades will pay a cash consideration of US$207 million, financed by the company’s credit facilities. The assets to be acquired include the Barnwell, South Carolina and Pryor, Oklahoma operations, as well as the operations at Fabrica de Papel San Francisco, S.A. de C.V., based in Mexicali, Mexico.

Cascades anticipates the transaction will close in August or September 2019.

“This acquisition is very well aligned with our strategic plan and supports our efforts to position our tissue platform for long-term growth,” says Mario Plourde, president and CEO of Cascades, in a release. “The acquisition of these well-funded assets enables us to do so while simultaneously supporting market consolidation and avoiding the risks inherent in the construction or installation of new equipment.

“We are focused on carrying out strategic investments in our key tissue sector that will modernize our assets, lower our fixed cost base, optimize our geographic footprint, and improve our logistics network and requirements to support the growth of our customers and Cascades.”

Orchids Paper’s integrated plants have an estimated parent roll capacity of up to 114,000 tons and up to an estimated 114,500 tons of converting capacity. Additionally, Orchids Paper has an agreement with Fabrica providing access for up to an additional 20,000 tons of converted products for the western U.S. market.

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More than US$240 million has been invested in the plants’ modern production and converting equipment and strategic partnership over the last five years. This includes, at the Pryor site, the installation of a new paper machine, two new converting lines and the modernization of two others converting lines.

At the Barnwell site, a new Valmet QRT paper machine was installed in 2017. In the coming months, Cascades will invest approximately US$5 million to add swing functionality to expand the range of products that can be manufactured from ultra-premium structured tissue to high-quality conventional, thereby maximizing its full potential.

The acquisition accelerates the modernization of Cascades’ U.S. tissue platform while strengthening the geographic and operational positioning of the company’s retail tissue segment in the southern and western United States. Cascades says that the acquired plants, equipped with 100″ paper machines, are better aligned with Cascades’ long-term model for its converting equipment, which will reduce the rejection rates during conversion operations and improve overall efficiency and productivity.

In the coming months, Cascades will maximize the profitability of the Barnwell and Pryor plants, which operated at approximately 30 per cent and 70 per cent of their total converting capacity in 2018, by transferring volumes that are currently outsourced to third parties or produced at the company’s other U.S. plants to these facilities.

The operational optimization of the new assets, lower transportation and sub-contracting costs, reduction of Orchids corporate costs, and the rationalization of Cascades’ current platform are expected to generate full-year annual EBITDA run-rate of approximately US$45 million beginning in 2021.

“The Barnwell and Pryor sites have well-invested modern equipment and an experienced and seasoned workforce,” says Jean-David Tartif, president and COO of Cascades Tissue Group. “Today’s acquisition is another important step we are taking that will increase our competitive positioning and support the growth of our customers by providing them with quality, value-added service and products.”

Cascades is a recovery specialist and manufacturer of packaging and tissue products headquartered in Quebec.