Tembec suitor Rayonier reaffirms acquisition
RAYONIER ADVANCED Materials Inc. (RYAM) has reaffirmed its commitment to acquire Tembec Inc. on the terms previously agreed with Tembec. The company believes that the previously announced arrangement consideration of $4.05 in cash or 0.2302 of a share of Rayonier Advanced Materials common stock per Tembec common share — which is subject to proration so that approximately 63 per cent of the aggregate consideration is paid in cash and 37 per cent is paid in Rayonier Advanced Materials stock — provides compelling value to Tembec shareholders. The company does not intend to increase the consideration offered to Tembec shareholders.
On July 14, 2017, the company received a letter from Oaktree Capital Management indicating its intent to vote against the company’s acquisition of Tembec at the special meeting of Tembec shareholders. Oaktree’s letter contains a number of misleading statements. The company believes that the previously announced arrangement consideration, which was the result of extensive negotiations with Tembec, represents a full and fair price and an attractive valuation for the following reasons:
• The arrangement consideration represents a significant premium to Tembec’s historical share price.
• The cash component of the arrangement consideration represents approximately 63 per cent of the current overall value of the arrangement consideration and provides a substantial and immediate value realization for Tembec shareholders.
• With approximately 37 per cent of the consideration in the form of Rayonier Advanced Material stock, Tembec shareholders have the opportunity to capture enhanced long-term value prospects through continuing participation in a larger, more diverse company.
• Enhanced liquidity: As part of a significantly larger company, Tembec shareholders receiving Rayonier Advanced Materials common stock will benefit from significantly increased market liquidity.
• Tembec’s board of directors and management reviewed strategic alternatives for nearly two years. The interest of Tembec’s board of directors and management are fully aligned to that of shareholders, and Tembec’s board received two fairness opinions to the effect that the transaction is fair.
• Tembec retained the ability to engage in discussions with respect to an unsolicited competing offer that could reasonably be expected to be more favourable to Tembec shareholders than the transaction with the company. In the nearly two months since the arrangement agreement was announced, no third party has made such an offer. Tembec’s board of directors unanimously approved the arrangement agreement and recommended that its shareholders vote for the arrangement. Institutional Shareholder Services (ISS) also recommended that Tembec shareholders vote for the arrangement with Rayonier Advanced Materials. TD Securities stated, “We believe that RYAM’s bid is fair.”
The company believes that the agreed-upon consideration reflects the significant value that can be created through a combination between the two companies, but also the meaningful risks associated with Tembec’s business segments, including:
• Commodity businesses: With the significant majority of Tembec’s revenue in commodity markets, the agreed-upon price reflects the volatile nature of these businesses as they are currently operating above historical averages.
• Softwood lumber tariffs: Tembec has a significant exposure in the developing trade tension between Canada and the United States with historical lumber export volumes in excess of 50 per cent.
• Currency: Nearly 50 per cent of Tembec’s Canadian sales are denominated in U.S. dollars, with the majority of its production inputs in Canadian dollars. A stronger Canadian dollar can significantly affect Tembec ’s cost po sition compared with foreign competitors.
• Expense and risk to synergies: While the company expects to achieve upward of $50-million of synergies over the three years following the completion of the arrangement, it will also require considerable time, money and resources, along with increased execution risk, to capture these synergies.
Rayonier Advanced Materials believes that its acquisition of Tembec is in the best interests of both companies and their shareholders and reaffirms its commitment to acquire Tembec on the previously announced terms.
We seek Safe Harbor.
Karen Baxter condensed this news release (email@example.com).
Norman Murray Betts, James E Brumm, James N Chapman, James V Continenza, Pierre Gignac, James Lopez, Luc Rossignol, Francis M Scricco, David J Steuart, Lorie Waisberg
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