Keeping in line with the trend towards consolidation in the industry, Paprican, FERIC and Forintek are partnering up. In late June, the three institutes voted to establish a structure under which thei…
Keeping in line with the trend towards consolidation in the industry, Paprican, FERIC and Forintek are partnering up. In late June, the three institutes voted to establish a structure under which their respective activities and research pursuits could be amalgamated. This vote spearheaded the development of an integration plan, which will be presented to each institute’s members for final approval, a process that is expected to take roughly six months.
The reasons for the decision are diverse, however, as Don Banks, chairman of the board of FERIC noted, pressures on the forest sector are coming from all sides and, as such, a multi-pronged approach is needed to tackle them. “Soaring energy prices, restrictions on available fibre, increased availability of low-cost foreign fibre, the value of the Canadian dollar, and the ongoing globalization of the industry are all factors,” he said. “From the forest, to wood, to pulp and paper, Canadian producers face similar challenges, and one of the goals of the Single Institute proposal is to come up with an organization conducive to even greater efficiency and capacity in innovation and research and development to address these challenges.”
Currently, there exists a relatively stark contrast between the mandates of each institute. As Terry Knee, director of communications at FERIC pointed out, FERIC now deals with everything from the tree stump, up until the point of entrance to the mill. “Then, Paprican and Forintek take over,” he explained. However, it is worth noting that the part of the process that necessitates FERIC’s involvement accounts for a hefty 50% of the final cost of the total product. “People in the mills often aren’t aware of this,” Knee said, “and although what’s going on in the mills is extremely important, what’s going into the mills is just as crucial. Mills cannot expect to make good products if chip quality is low.” Knee is confident that the new structure will foster an environment that will be favourable to the discussion of some of these issues. “The merger of the three institutes will make possible a situation whereby everyone can look at the issues together, and collaborate to solve the problem.”
Phil Latos, chairman of the board of Forintek expressed similar sentiments. “Our three institutes are all engaged in research relevant to forest products and technology, and many of our members hold membership in one, two or all three of the institutes,” he said. “Our objective is to ensure that FERIC, Forintek and Paprican’s research teams continue to play a leading role in the restructuring of Canada’s forest products industry. Teaming up would allow the industry to benefit from synergies and facilitate the development of an integrated approach to research and development in the Canadian forest sector as well as be in the best possible position to play a leading role at the global level.”
Frank Dottori, chairman of the board of Paprican is hopeful that the new structure will serve to support the industry on a variety of levels. “With the creation of this single institute, we will be in a position to speak with a strong common voice on forest sector issues,” he said. Dottori contends that the adversity afflicting the industry has paved the way for this consolidation, and that the current environment is highly suitable for the merger. “It is in difficult times that companies can truly feel the strength of joining forces to collaborate in pre-competitive areas with other members and clients of the new institute. I am confident that this new structure will also allow us to attract new members and increase the overall financial support for research and development in the forest sector.”
The merger is now at the due diligence stage, a process that can take a relatively long time, FERIC’s Terry Knee noted. “The merger is now in phase 1, the due diligence stage, and things likely won’t be completed before six months, at least.”
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