Catalyst Paper Corporation (CPC) has received an expression of intent for its acquisition from an international corporation with headquarters in India, it was publically revealed this week. If accepted, the acquisition would give Kejriwal Group International (KGI) majority control of CPC.
The expression of intent details a transaction in which KGI acquires majority shares at $6 per share.
A CPC press release on Monday announced the intended acquisition and stated, “The board of directors has indicated it is encouraged by KGI’s proposal, which could provide CPC with a signi cant amount of capital, which further enhances and accelerates Catalyst’s planned growth initiatives.”
Catalyst Paper Potential Takeover
The Mumbai, India-based company has committed to paying $6 a share for Catalyst shares not held by the company’s four largest stakeholders, prompting the surge in price for Catalyst shares.
In a news release, Catalyst said it has received an expression of intent outlining the terms of the potential acquisition from Kejriwal Group Inter- national (KGI) and the four principal stakeholders in Catalyst – bondholders who also own 79 per cent of the shares in the BC company.
The deal involves KGI acquiring the shares of Catalyst held by the four principal stakeholders and exchanging the debt instruments they hold in the BC pulp and paper company for a new term loan. They also plan on ex– changing payment-in-kind notes for a US$260.5 million term loan.
KGI further committed to a $25 million equity investment in the company and an additional $35 million in a newly-formed guarantor of the new term loans.
CPC owns the Powell River pulp and paper mill, which employs approximately 400 people. According to CPC’s own research, the mill in Powell River invests $41 million in wages and benefits, $10.1 million on local purchases, $3.4 million in property taxes and a broader regional economic impact estimated at $400 million.
Catalyst owns pulp and paper mills at Crofton, Port Alberni and Powell River, BC, as well as two mills in the US located at Biron, Wi, and Rumford, ME. It purchased the US mills for US$74 million in January, 2015.
CPC was informed of the proposed deal on Monday, May 16, when it learned that schedule 13D lings had been made with the Securities and Exchange Commission in the United States.
Schedule 13Ds may be a precursor to takeovers, company breakups and other events that affect a change in control of the company.
Catalyst, which reported sales of $2 billion in 2015, has been struggling to adapt to the shift to electronic media by going up the value chain in paper products. The company was rescued from bankruptcy in 2012 through a restructuring with its bondholders at that time and the BC towns where its mills operate reduced the municipal tax burden on the company to help bring its costs down.
Catalyst reported a net loss of $49 million in 2015, a year in which President Joe Nemeth said demand for all paper grades declined.
Catalyst employs 2,800 people at its BC and US operations.