In a stunning move sure to overjoy shareholders, Montreal, QC’s, Tembec Thursday announced it is entertaining a takeover bid by Rayonier Advanced Ma- terials, based out of Jacksonville, FL.
Tembec is selling to Rayonier for $4.05 a share in cash or the equivalent in Rayonier shares. The $320-million offer, which also includes the assumption of $487-million in debt, represents a 37-per-cent premium to Tembec’s share price at Wednesday’s close.
Rayonier Makes Bid for Tembec
Rayonier Advanced Materials, out of Jacksonville, FL, will “come to bat” to protect the interests of Montreal, QC’s, Tembec in the cross-border battle over softwood lumber, the head of the timber REIT and specialty cellulose com- pany said Thursday after announcing a friendly takeover of the Canadian forestry firm.
The deal, valued at US$807 million including debt, would see the merged entity keep a Canadian headquarters in Montreal, with the main corporate office in Jacksonville.
TEMBEC BALANCE SHEET
Founded in 1972, Tembec produces lumber, paper, pulp and specialty cellulose pulp. It has about 3,000 employees in Canada and France.
Tembec says the agreement will bolster its balance sheet and give it more resources to invest in growth.
Rayonier gains more diversification in product line and geography while cutting its currency risk. The combined company is expected to generate annual earnings before interest, taxes, depreciation and amortization of US$400-million on revenue of US$2-billion.
Tembec makes forest products, including high-purity cellulose, but also lumber, pulp and paper. It has 3,000 workers spread out over 17 mills and plants in Canada, the United States and France.
Rayonier officials said Tembec’s recently-announced $136-million (Canadian) capital spending plans for its Quebec sites will be maintained while the combined company’s Canadian headquarters will stay in Montreal.
Earlier Tuesday, Tembec reported earnings of $24 million or 24 cents per share in the quarter ended March 25, down slightly from its profit of $27 million or 27 cents per share a year earlier.
Sales in the company’s second quarter rose slightly to $387 million, with more than 70 per cent from paper, pulp and specialty cellulose pulp.
RAYONIER’S MAIN BUSINESS
Rayonier Advanced Materials is a supplier of high purity cellulose, used in cellphones, computer screens, filters, textiles and pharmaceuticals. It has about 1,200 workers with plants in Florida and Georgia.
Rayonier Advanced Materials’ main business is supplying high-purity cellulose, a natural polymer used by its customers to make cellphones, flat-panel televisions, tires, paint and pharmaceuticals. It has 1,200 employees and seven facilities, including five for wood-chipping.
Paul Boynton, President and CEO of Rayonier Advanced Materials said Tembec made for an attractive acquisition because it complements his company’s specialty cellulose business and it allows it to enter new operations like packaging, forest products, newsprint and pulp.
TEMBEC EXISTING INVESTORS
Tembec investors will vote on the deal in a special meeting to be held in July. Prem Watsa’s Fairfax Financial, which holds a nearly 20-per-cent stake in Tembec, supports the tie-up, the companies said.
Tembec had a market capitalization of barely $300-million before Rayonier’s offer. But its corporate history is the stuff of legend. Founded by entrepreneur Frank Dottori in 1973, Tembec parlayed one shuttered saw mill in Temiscaming, QC, into a multinational empire. The National Film Board made a documentary about Mr. Dottori and the town’s struggle to survive.