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TAKEOVER: FINE AGREEMENT SEES DOMTAR INTO US MARKET (July 03, 2001)

MONTREAL, QC/ATLANTA, GA — Domtar Inc is poised to enter the US market. A letter of intent, signed by both Domtar…

MONTREAL, QC/ATLANTA, GA — Domtar Inc is poised to enter the US market. A letter of intent, signed by both Domtar and Georgia-Pacific Corp., will transfer G-P’s stand-alone uncoated fine paper mills at Ashdown, AK, Nekoosa and Port Edwards, WI, and Woodland, ME, to Domtar, giving Domtar a wider geographic profile. Until now, almost all of Domtar’s mills were in Canada.

While Domtar is the largest producer of specialty and fine papers in Canada, the agreement will elevate the company from seventh to second place in the North American market, after International Paper Co., by doubling its fine-paper production capacity.

Although the terms of the deal were not disclosed, The Wall Street Journal quoted industry sources as saying that Domtar is expected to pay approximately $1.5 billion US, likely in cash. The agreement is contingent on the completion of due diligence, execution of a definitive agreement and customary approvals, to be completed in the second quarter of 2001.

According to Laurent Lemaire, chief executive of Cascades Inc., the Domtar purchase just might give Cascades a chance to increase its ownership in Norampac. A 50-50 Cascades-Domtar joint venture, Norampac has been quite successful by uniting both companies’ packaging and containerboard operations, and continues to provide profits to both partners. “We’ve never made it any secret Norampac is at the top or our wish list and we ultimately want 100% ownership,” said Lemaire. However, he had to admit that, despite talks with Raymond Royer, Domtar’s chief executive, there are no changes foreseen in the near future.