Interfor acquires four US sawmills from Georgia-Pacific
11 June 2021Interfor Corporation has announced that it has reached an agreement with Georgia-Pacific Wood Products LLC and GP Wood Products LLC to acquire four of its sawmill operations located in Bay Springs, Mississippi, Fayette, Alabama, DeQuincy, Louisiana and Philomath, Oregon. The total purchase price of US$375m, 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 north-west, 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 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 north-west 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 north-west and the remaining 23% will be in British Columbia.
The sawmill operations, excluding the DeQuincy sawmill, generated US$53m of EBITDA in the first quarter of 2021, reflecting an EBITDA margin of US$508 or US$643 per thousand board feet. This compares favourably with Interfor’s EBITDA margin of US$589 per thousand board feet for the same period.
The completion of the acquisition is subject to customary conditions and regulatory approvals and is expected to close in the third quarter of 2021.