VANCOUVER, BC, Oct. 26, 2021 /CNW/ - West Fraser Timber Co. Ltd.
("West Fraser" or the "Company") (TSX and NYSE: WFG)
announced today that it has entered into an agreement to acquire
Georgia Pacific's oriented strand
board ("OSB") mill near Allendale, South
Carolina for approximately $280
million. The transaction is anticipated to close following
successful completion of U.S. regulatory reviews and satisfaction
of customary conditions. Management will
provide an update
and further details about the transaction on
West Fraser's third quarter earnings call on October 28, 2021. All dollar amounts in this
news release are expressed in U.S. dollars.
The Allendale facility, which
initially began producing OSB in 2007, has been idle since late
2019 and has an estimated stated capacity of approximately 760
million square feet (3/8-inch basis). The Company intends to invest
an estimated $70 million of
additional capital to upgrade and optimize the facility in
preparation for its restart and this upgrade is anticipated to take
approximately nine months to complete. The mill is expected to
directly employ approximately 135 people and be one of the lowest
cost mills in the Company's OSB portfolio after the optimization is
complete and the mill has ramped up to full production, a process
that typically takes 18-24 months after restart.
Track Record of Mill Restarts and Strategic Rationale
The Allendale acquisition
offers another opportunity for West Fraser to create value by
deploying the Company's expertise at successfully reinvesting in
and restarting idled OSB mills. Recent West Fraser OSB mill
restarts include Chambord, Quebec
in March 2021 as well as Huguley, Alabama (2017) and Jefferson, Texas (2013). After modernization,
the Allendale facility will
enhance West Fraser's OSB portfolio with its attractive location in
the U.S. South where fibre is abundant and low-cost. The mill's
additional OSB capacity will also give West Fraser the flexibility
to better meet customer demand, particularly from large, growing
end-markets in the southeastern U.S.
"We look forward to acquiring and upgrading the Allendale mill to make it another component of
West Fraser's low-cost production portfolio. Further, the
additional production capability will provide greater operational
flexibility across our OSB mill portfolio to meet demand growth for
our engineered wood products, including for our specialty and
value-added products," said West Fraser's President and CEO,
Ray Ferris. "We have the leadership,
people and know-how to execute on the capital and upgrade plan for
this mill and expect to be ready for a restart within nine months
of the acquisition closing based on current demand
conditions."
West Fraser intends to finance the acquisition with cash on
hand. The total investment for the Allendale acquisition is expected to be at a
significant discount to the costs of an equivalent greenfield OSB
mill while requiring a shorter time to initial production. Based on
West Fraser's latest internal analysis, the returns of this mill
acquisition and investment are expected to be commensurate with
those for other capital projects of similar magnitude.
The Company
West Fraser is a diversified wood products company with more
than 60 facilities in Canada,
the United States, the
United Kingdom, and Europe. From responsibly sourced and
sustainably managed forest resources, the Company produces lumber,
engineered wood products (OSB, LVL, MDF, plywood, and
particleboard), pulp, newsprint, wood chips, other residuals and
renewable energy. West Fraser's products are used in home
construction, repair and remodelling, industrial applications,
papers, tissue, and box materials.
Forward-Looking Statements
This news release contains forward-looking information or
forward-looking statements (collectively, "forward-looking
statements") within the meaning of applicable securities laws,
including the expected closing date of the transaction, the rated
capacity of the mill, the estimated capital investment and time to
upgrade and modernize the mill, its projected ramp up timeline,
cost position and the returns generated. Any such forward-looking
statements are based on information currently available to us and
are based on assumptions and analyses made by us in light of our
experience and our perception of historical trends and current
conditions. Readers should also refer to the risk factors set forth
in the Company's annual information form and management's
discussion and analysis for the year ended December 31, 2020, each dated February 11, 2021, available at SEDAR
(www.sedar.com) and EDGAR (www.sec.gov/edgar.shtml). There can be
no assurance that the plans, intentions or expectations upon which
forward-looking statements are based will be realized. Actual
results may differ, and the difference may be material and adverse
to the Company and its shareholders.
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SOURCE West Fraser Timber Co. Ltd.