13:56:15 EDT Thu 28 Mar 2024
Enter Symbol
or Name
USA
CA



Interfor Corp
Symbol IFP
Shares Issued 54,790,599
Close 2022-09-30 C$ 24.18
Market Cap C$ 1,324,836,684
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Interfor to acquire Chaleur Forest Products for $325M

2022-10-03 09:19 ET - News Release

Mr. Rick Pozzebon reports

INTERFOR TO ACQUIRE CHALEUR FOREST PRODUCTS IN NEW BRUNSWICK, CANADA

Interfor Corp. has reached an agreement with an affiliate of the Kilmer Group to acquire 100 per cent of the equity interests in the entities comprising Chaleur Forest Products.

Chaleur owns two modern and well-capitalized sawmill operations located in Belledune and Bathurst, New Brunswick, with a combined annual lumber production capacity of 350 million board feet. Chaleur also operates a woodlands management division based out of Miramichi that manages approximately 30 per cent of the total Crown forest in New Brunswick. This division provides a secure source of fibre supply for the sawmill operations as well as a stable, long-term stream of cash flow from third party log sales, licence management fees and silviculture activities.

The purchase price is $325-million, on a cash and debt-free basis, which includes approximately $31-million of net working capital. In addition, Interfor will assume Chaleur's countervailing (CV) and anti-dumping (AD) duty deposits at closing, for consideration equal to 55 per cent of the total deposits on an after-tax basis. As of Aug. 31, 2022, Chaleur had paid cumulative CV and AD duties of approximately $82-million (U.S.).

"This acquisition is consistent with Interfor's growth-focused strategy as a pure-play lumber producer and builds upon our recent expansion into Eastern Canada with further geographic diversity," said Ian Fillinger, president and chief executive officer. "New Brunswick has a secure, high-quality and competitive log supply, a supportive investment environment and proximity to key eastern markets. These are well-managed and efficient mills with a desirable SPF product mix, which fit extraordinarily well within our existing portfolio. Chaleur's strong management team further bolsters our core lumber strength and we look forward to welcoming the team into our company."

On a pro forma basis, Interfor's total annual lumber production capacity will increase to 5.1 billion board feet, of which 44 per cent will be in the U.S. South, 19 per cent in Eastern Canada, 15 per cent in the U.S. Northwest, 15 per cent in British Columbia and 7 per cent in Atlantic Canada.

The acquisition will be immediately accretive to Interfor's earnings and is expected to provide attractive returns in both the near-term and over the long-term. Interfor estimates Chaleur's mid-cycle EBITDA (earnings before interest, taxes, depreciation and amortization) to be approximately $50-million per year presynergies, taking into account mid-cycle lumber prices and current run-rate performance. Interfor expects to achieve synergies of $5-million per year from combined sales and marketing opportunities, shared purchasing programs and general and administrative expense reductions. These synergies are expected to be fully achieved within 12 months of closing, with no capital requirements.

Interfor intends to finance the acquisition with a combination of cash on hand and its existing credit facilities. Following the completion of this acquisition Interfor will continue to have significant financial flexibility to execute its strategic capital investment plans and consider additional value-creating capital deployment options. As of Aug. 31, 2022, Interfor had net debt of approximately $48-million and a net debt to invested capital ratio of 2 per cent. Pro forma the Chaleur acquisition and pro forma Interfor's $100-million substantial issuer bid completed on Sept. 12, 2022, Interfor's net debt to invested capital ratio as of Aug. 31, 2022, would remain below 20 per cent. Similarly, pro forma liquidity as of Aug. 31, 2022, would be approximately $322-million, before consideration of significant additional borrowing capacity available under existing credit limits and continued near-term operating cash flows.

The completion of the acquisition is subject to Canadian and U.S. regulatory reviews and customary conditions for a transaction of this kind and is expected to close in the fourth quarter of 2022.

Chaleur's operations were not damaged or impacted by Hurricane Fiona in any way.

About Interfor Corp.

Interfor is a growth-oriented forest products company with operations in Canada and the United States. The company has annual lumber production capacity of approximately 4.7 billion board feet and offers a diverse line of lumber products to customers around the world.

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