US-headed forest industry major Rayonier Advanced Materials Inc. (RYAM) has announced that it has entered into a definitive agreement under which Rayonier Advanced Materials will acquire Canadian forest products major Tembec Inc (Tembec), providing the combined company with leading and complementary positions in key high purity cellulose end-uses and diversified earning streams from packaging, paper, high-yield pulp and forest products businesses.
With its expanded geographic reach, enhanced R&D capabilities, and broader, more flexible asset base, the combined company will offer customers exceptional product breadth across the spectrum of high purity cellulose products and create additional growth opportunities in packaging and forest products.
The purchase price is approximately US$807 million, including the assumption of US$487 million of debt net of cash, represents, and transaction received the unanimous approval of the Boards of Directors of both companies.
This transaction advances our growth objective to pursue strategic acquisitions where we can leverage our core competencies to provide significant long-term shareholder returns. By joining forces, we are diversifying our product offering in high purity cellulose and expanding into the adjacent packaging and forest products markets with a significant scale. With pro forma revenue of US$2 billion, the combined company will be poised to compete effectively in any market, benefit from a greater product and geographic diversity, and provide an attractive value proposition for our shareholders, said Paul Boynton, Chairman, President, and CEO of Rayonier Advanced Materials.
Maintaining Tembec’s operations and jobs in Canada and France
The Company expects to retain Canadian headquarters in Montreal, Québec (QC), and a presence in Ontario (ON), and continue all Tembec operations.
The Company will also proceed with Tembec’s recently announced four-year investment plan for its Québec facilities and make additional investments in other key facilities and operations to further enhance the Company’s growth potential and competitiveness.
Rayonier Advanced Materials is the ideal partner for us, given the complementary nature of our products, expertise, and resources. They are committed to our operations and employees in Canada and France and—above all—to the values we share. This combination will enable us to sustainably grow our business for the benefit of our customers, employees, and communities. We are pleased that our shareholders will be able to participate in the company’s future success through an ongoing equity ownership, said James Lopez, President, and CEO of Tembec.
Rayonier Advanced Materials intends to finance the cash portion of the transaction with a combination of cash on hand and committed bank financing.
The transaction does not require the approval of Rayonier Advanced Materials shareholders.
Following the transaction, our solid capital structure will enable us to make high-return investments to support the growth of Tembec’s attractive businesses and product development capabilities to better serve customers. We look forward to working with Tembec’s exceptional team, unions, and other stakeholders to realize the abundant opportunities ahead, Paul Boynton said.
The transaction will be carried out by way of a court-approved plan of arrangement and will require the approval of at least 66 2/3 of the votes cast by Tembec shareholders. Fairfax Financial, a 19.99 percent shareholder of Tembec, has advised that it is supportive of the transaction.
The transaction agreement contains a non-solicitation covenant on the part of Tembec, subject to the customary “fiduciary out” provisions. In addition to Tembec shareholder and court approvals, the transaction is also subject to other conditions and receipt of other approvals, including receipt of regulatory approvals.
Subject to obtaining the required approvals, the transaction is expected to be completed in the second half of 2017.
For Rayonier Advanced Materials, BofA Merrill Lynch is serving as financial advisor, and Wachtell, Lipton, Rosen & Katz, McCarthy Tétrault LLP, and Hogan Lovells US LLP are serving as legal counsel.
For Tembec, Scotia Capital is serving as financial advisor to the company and National Bank Financial is serving as financial advisor, on a non-contingent fixed-fee basis to the Tembec Board of Directors. Stikeman Elliott LLP, Cahill Gordon & Reindel LLP, Dechert LLP, and Slaughter and May are serving as legal counsel.
