Resolute falls into the lap of a wealthy Asian family

British Columbia-based Groupe Papier Excellence, owner of Domtar, will acquire Résolu, a forest and paper company that owns approximately 25 assets in Quebec

Posted at 6am yesterday

Andre Dubuc

Andre Dubuc
The press

The buyer is offering to pay $20.50 per share for Resolute Forest Products, a premium of 64% to the stock’s closing price on Tuesday. In addition, Resolute shareholders are eligible for a potential refund of duties up to a maximum of $500 million.

If we take into account the debt (about $100 million) and the pension fund deficit (about $900 million), the transaction is valued at $2.7 billion, explains Patrick Loulou, vice president of the advisor, in one Interview Head of Strategy at Groupe Paper Excellence.

Money is not a problem

Paper Excellence, a private company, is positioning itself as a consolidator in the North American pulp and paper industry at a time of downsizing and profound structural changes in demand with a downsizing of the newspaper and paper office and an increase in board consumption.


PHOTO DANIEL ACKER, BLOOMBERG ARCHIVE

Logs are unloaded from a cart to be made into paper outside of Domtar’s paper mill in Rothschild, Wisconsin.

Founded in 2007, Papier Excellence acquired Catalyst Paper and some MacMillan Bloedel plants in 2019. Papier Excellence then focused on western Canada, acquiring twice the size Domtar for about $3 billion last year.

Paper Excellence is 100% owned by Indonesian Jackson Widjaja. Mr. Widjaja comes from the family of conglomerate Sinar Mas, whose pulp and paper division Asian Pulp and Paper is a global paper giant operating in Indonesia and China. The Widjaja family has a net worth estimated at $10 billion by the magazine forbes.

Papier Excellence also has assets in France and Brazil. In France, Mr. Widjaja bought two factories from Tembec in 2010. In South America, the company was given the green light to acquire Eldorado Brasil Celulose SA for nearly $3 billion.

If our calculations are correct, Mr. Widjaja will have invested approximately $9 billion in pulp and paper since 2017 with the acquisitions of Domtar, Eldorado and now Resolute.

“We believe that the lumber market has great potential,” says Patrick Loulou. Residential construction is on the rise across North America and will continue to grow in the coming years. Resolute is well positioned to handle it. Thanks to the financial means of Groupe Paper Excellence, its management will also have the means to invest in order to grow. »


INFOGRAPHIC THE PRESS

No closures, promised

If the purchase of Resolute by Domtar, a subsidiary of Groupe Papier Excellence, goes through, the two companies will continue to operate independently, Mr Loulou argues. Resolute’s Montreal headquarters, which employs approximately 370 people, remains open, as does Domtar’s Montreal administrative office, which employs 425 people. This office mainly deals with information technology, finance, and legal and environmental issues, says Mr. Loulou, a former Domtar employee.


PHOTO SARAH MONGEAU-BIRKETT, LA PRESSE ARCHIVE

Resolute Headquarters, De La Gauchetière Street West, Montreal

In addition, the acquirer expects to maintain Resolute’s manufacturing footprint and employment base.

According to Mr. Loulou, the assets of Domtar and Resolute complement each other because Domtar is not wood, tissue paper or newsprint, three of Resolute’s strengths.

The closed Amos and Baie-Comeau factories are included in the transaction, but the press release says nothing about their future.


PHOTO YVES TREMBLAY, THE EYES OF HEAVEN, COLLABORATION SPECIAL ARCHIVES

The closed Resolute factory in Baie-Comeau

Instead, Papier Excellence will conduct a detailed feasibility study for the eventual conversion of Resolute’s newsprint mill in Gatineau, Quebec, to produce gift wrap. The work will take 18 to 24 months and cost millions. Paper Excellence is conducting this type of transformation at Domtar’s Tennessee facility at a cost of $350 million. The proximity of hypermarkets explains why this project is being studied in Gatineau rather than Amos or Baie-Comeau, explains Mr. Loulou.

“It’s a shame,” says Quebec

In conversation with The press Last January, Quebec Minister of Economy and Innovation Pierre Fitzgibbon said he was willing to help fund the province’s paper mill machinery revamp, as he had already done with Kruger.

“It’s always a shame when a Quebec-headquartered company is sold,” Mathieu St-Amand, the minister’s spokesman, said in an email. The new buyer, Groupe Papier Excellence, wants to keep the jobs at the Montreal headquarters and we will work with them on this. Since 2018, we’ve invested more than $250 million in companies looking to strengthen their Quebec headquarters. »


PHOTO ROBERT SKINNER, LA PRESSE ARCHIVE

Pierre Fitzgibbon, Minister for Economy and Innovation

According to Jean-François Samray, CEO of the Quebec Forest Industry Council, who is excited about the transaction, a conversion like the one envisaged at Gatineau will require an investment of between 600 million and 1.2 billion Canadian dollars.

“An acquirer is not going to pay a large premium on the stock price and then close assets. We are dealing with a buyer who sees value in this, who knows they have to invest and who has decided to move on. That’s very good news,” says Mr. Samray, whose organization represents the interests of forest and paper companies.

The transaction is expected to close by the end of the first half of 2023, after being accepted by shareholders and regulators.

Concerns in Saguenay

Saguenay City Councilor Jean-Marc Crevier wonders what will happen to the Saguenay-Lac-Saint-Jean factories, as well as to the innovative project to produce cellulose fibers at the Kénogami factory, for which an investment of 38 million was announced. “We have the right to ask if Domtar will continue the cellulose fiber project, which is a future project for the Kénogami plant and can ensure the growth of production and jobs. Mr. Crevier adds that the Quebec government should have a say in the transaction as it grants hydraulic engineering rights to operate the network of hydroelectric power plants in Saguenay-Lac-Saint-Jean.

The daily

Learn more

  • Resolute’s key assets in Quebec
    Headquarters in downtown Montreal
    Kraft pulp mill in Saint-Félicien
    Paper mills in Alma, Dolbeau, Kénogami, Clermont and Gatineau
    Planing mills in Normandy and Senneterre
    15 sawmills
    Hydro-Saguenay: 7 power plants, installed capacity of 170 MW

    Source: Resolute Forest Products

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