Pulp & paper giant looks to buy American rival
CEO of pulp-and-paper producer says firm is keen to enter American market
Richmond-headquartered Paper Excellence, B.C.'s biggest pulpand-paper producer, views its US$3-billion offer to buy rival Domtar as a “natural fit” to gain a better position in the U.S. market, according to CEO Joe Ragan.
On Tuesday, the companies announced the definitive deal, which will see Paper Excellence pay US$55.50 per share in cash to acquire the formerly Montrealbased forestry giant Domtar's outstanding stock.
Paper Excellence, which operates seven pulp-and-paper mills in Canada — five of which are in B.C. — will continue Domtar's operations, which include 13 pulpand-paper mills, with 10 other manufacturing plants, as a standalone business under its existing management. However, Ragan, in a news release, said his management team is “enthusiastic about entering the American market as we continually improve Paper Excellence's ability to serve its expanding blue-chip customer base.”
He added that Paper Excellence has “long admired Domtar's expansive global footprint,” and expects it to be a valuable, long-term asset for his firm.
Domtar, a leading producer of sheet paper for printers and copiers, in February sold off a division that makes personal-care products for US$920 million, and its lockup with Paper Excellence comes as the paper industry has begun to recover from a drop in demand for paper in offices and schools.
Pulp, made from wood chips and residual waste from sawmilling, has seen prices rise along with lumber, which itself has soared into the stratosphere since last fall.
Last week, the price for 1,000 board feet of Western spruce, pine or fir two-by-fours, a standard industry measure, hit US$1,330 compared with US$336 at the same point in 2020, according to the industry publication Madison's Lumber Reporter.
Paper Excellence, in recent months, has made adjustments of its own, permanently closing its pulp mill in Mackenzie, where it struggled to find a consistent, cost-competitive supply of wood chips, but restarting other mills that had been curtailed.
Domtar CEO John Williams said the deal “validates our long-term strategic plan for our leading paper and pulp businesses, and for our continued expansion into packaging.”
Domtar operates a pulp mill in Kamloops in its roster of 13 mills, four of which are in Canada, and manufacturing plants across the U.S. Midwest and South.
Increased demand for packaging materials during COVID-19 has been helpful for pulp-and-paper producers.
Last fall, Paper Excellence restarted some of its operations and recalled workers that were laid off partly due to increased orders for specialty papers used in food packaging.
In April, at the same time it closed the Mackenzie mill, Paper Excellence said it would restart some operations at its Powell River mill and work toward reopening a mill in Prince Albert, Sask., as well as spend $13 million to upgrade equipment at its Port Alberni pulpand-paper mill.