Interfor Continues to Grow with Acquisition of Four US Sawmills from Georgia-Pacific
May 27 2021 - 5:31PM
INTERFOR CORPORATION (“Interfor” or the “Company”)
(TSX: IFP) announced today that it has reached an agreement with
Georgia-Pacific Wood Products LLC and GP Wood Products LLC
(collectively “Georgia-Pacific”) to acquire four of its sawmill
operations located in Bay Springs, MS, Fayette, AL, DeQuincy, LA
and Philomath, OR (collectively the “Sawmill Operations”). The
total purchase price of US$375 MM, which includes working capital,
will be funded entirely from cash on hand.
The Sawmill Operations are highly complementary to Interfor’s
existing platforms in the US South and the US Northwest, and the
acquisition will support accelerated growth and enhance the
Company’s position to benefit from robust market conditions. 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.
“This acquisition enhances Interfor’s growth-focused strategy as
a pure-play lumber producer, and provides significant economies of
scale given the complementary geographic fit with our existing US
operations” said Ian Fillinger, President and Chief Executive
Officer. “We’re excited to acquire these high-quality assets as
part of our balanced approach to capital allocation to drive
shareholder value.”
The Sawmill Operations have a combined annual lumber production
capacity of 720 million board feet. The Bay Springs, Fayette and
Philomath sawmills are currently operating on a full-shifting
basis. The DeQuincy sawmill, which was idled in May 2020 during the
COVID-19 pandemic, has an annual capacity of 200 million board
feet. Interfor is currently evaluating its strategy and options for
the site, including re-start plans.
On a pro-forma basis, Interfor’s total annual lumber production
capacity will increase to 3.9 billion board feet, of which 3.0
billion board feet or 77% will be US-based and not subject to
softwood lumber duties. Interfor’s US South production capacity
will grow by 500 million board feet, or 29%, to 2.2 billion, while
production capacity in the US Northwest will grow by 220 million,
or 40%, to 770 million board feet. Following the transaction, 57%
of Interfor’s production capacity will be in the US South, 20% will
be in the US Northwest and the remaining 23% will be in British
Columbia.
The Sawmill Operations, excluding the DeQuincy sawmill,
generated US$53 million of EBITDA1 in the first quarter of 2021,
reflecting an EBITDA1 margin of US$508 or $643 per thousand board
feet. This compares favorably with Interfor’s EBITDA margin of $589
per thousand board feet for the same period.
Following the completion of this transaction Interfor will
continue to have significant financial flexibility to consider
additional value-creating capital deployment options. As of April
30, 2021 Interfor was in a net cash position of approximately $380
million. Proforma this acquisition and the special dividend
announced on May 12, 2021, Interfor’s Net Debt to Invested Capital
ratio as of April 30, 2021 would increase to 13%. Similarly,
proforma liquidity as of April 30, 2021 would be approximately $500
million, before consideration of significant additional borrowing
capacity available under existing credit limits and continued
strong near-term operating cash flows.
The completion of the acquisition is subject to customary
conditions and regulatory approvals for a transaction of this kind
and is expected to close in the third quarter of 2021.
___________
1 Reflects mill level EBITDA as prepared in accordance with
Georgia-Pacific’s financial practices.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking information about the
Company’s business outlook, objectives, plans, strategic priorities
and other information that is not historical fact. A statement
contains forward-looking information when the Company uses what it
knows and expects today, to make a statement about the future.
Statements containing forward-looking information in this release,
include but are not limited to, statements regarding production
capacity, facility restart plans and ramp-up timelines, pro-forma
capacity, expected earnings and returns, pro-forma debt ratios,
liquidity, borrowing capacity, regulatory approvals and the
expected closing date, and other relevant factors. Readers are
cautioned that actual results may vary from the forward-looking
information in this release, and undue reliance should not be
placed on such forward-looking information. Risk factors that could
cause actual results to differ materially from the forward-looking
information in this release are described in Interfor’s annual
Management’s Discussion & Analysis under the heading “Risks and
Uncertainties”, which is available on www.interfor.com and under
Interfor’s profile on www.sedar.com. Material factors and
assumptions used to develop the forward-looking information in this
report include volatility in the selling prices for lumber, logs
and wood chips; the Company’s ability to compete on a global basis;
the availability and cost of log supply; natural or man-made
disasters; currency exchange rates; changes in government
regulations; the availability of the Company’s allowable annual cut
(“AAC”); claims by and treaty settlements with Indigenous peoples;
the Company’s ability to export its products; the softwood lumber
trade dispute between Canada and the U.S.; stumpage fees payable to
the Province of British Columbia (“B.C.”); environmental impacts of
the Company’s operations; labour disruptions; information systems
security; and the existence of a public health crises (such as the
current COVID-19 pandemic). Unless otherwise indicated, the
forward-looking statements in this release are based on the
Company’s expectations at the date of this release. Interfor
undertakes no obligation to update such forward-looking information
or statements, except as required by law. The Company’s
independent auditor, KPMG LLP, has not audited, reviewed or
performed any procedures with respect to the interim financial
results and other data included in this release, and accordingly
does not express an opinion or any other form of assurance with
respect thereto.
ABOUT INTERFOR
Interfor is a growth-oriented forest products company with
operations in Canada and the United States. The Company has annual
production capacity of approximately 3.2 billion board feet and
offers a diverse line of lumber products to customers around the
world. For more information about Interfor, visit our website at
www.interfor.com.
Investor contact and further information:
Rick Pozzebon, Senior Vice President & Chief Financial
Officer(604) 689-6804
Mike Mackay, Vice President of Corporate Development &
Strategy (604) 689-6846
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