Jim Pattison, Canadian billionaire and philanthropist, offered to take Canfor (CFP.T) private on Sunday.
Pattison is the CEO of Great Pacific Capital, which already possesses a 51% stake in Canfor, proposed to buy the remaining shares for $16 a piece in an all-cash deal, an 82% premium to the stock’s closing price on Friday.
“The elimination of the significant administrative expenses incurred in maintaining a public company listing in Canada will allow for reinvestment of these funds into stabilization of the company’s operations,” Canfor said in a statement late Sunday.
Canfor is a forest product company based in Vancouver, B.C. with interests in Alberta, and throughout the southern United States and a recent foray into Sweden with its majority acquisition of Vida Group. Canfor produces primarily softwood lumber and also owns a 54.8% interest in pulp and paper producer, Canfor Pulp Products (CFX.T).
The offer would help them escape the financial maze that has caused production curtailments all over British Columbia, and included the closure of two sawmills.
Canfor announced it will temporarily curtail operations at all British Columbia sawmills April 29 due to low lumber prices & high fibre costs, reducing production output by 100 million board feet. Canfor has 13 sawmills in Canada, w total annual capacity of 3.8 billion board feet
— Madison’s Lumber Prices (@LumberNews) April 25, 2019
The closure at Mackenzie came about because of the high cost of fibre, continued poor lumber markets and challenging operating conditions, and ultimately the mill became too expensive to operate. The Isle Pierre sawmill saw permanently reductions in shift-work from two to one, and will be effective as of September 20. The capacity reduction is a consequences of the mountain pine beetle epidemic, which reduced timber supply. The infestation of beetles began in the late 1990s and peaked in 2005, but still has negative effects today.
- Canada’s forest sector is a key industry supporting rural communities and generating $22 billion in GDP (2016)
- Canada’s forest industry employs more than 200,000 Canadians, including 9,500 jobs in Indigenous communities (2015)
- More than 170 rural municipalities have a significant portion of their income generated by the forest sector
- There are over 600 mills producing softwood lumber in Canada
Canfor has 13 sawmills in Canada, with 12 in British Columbia, with most of those in the northern half of the province. The other sawmill is in Alberta. Canfor produces 3.8 billion board feet of lumber annually.
The deal would give Pattison control over Canfor’s manufacturing of lumber, plywood, pulp and paper. The offer comes amid a slump in Canfor’s shares, which have plunged 69% during the past 12 months.
Canfor’s response included cautionary advice for investors:
“Canfor cautions its shareholders and potential investors that the indicative offer is non-binding on Great Pacific and there can be no certainty that the indicative offer or any other strategic transaction with Great Pacific or any other person will be pursued by Canfor.”
Canfor said it has formed a special committee of independent directors to review the offer.
The markets responded favourably to the deal, giving them a 71.9% bounce in their stock price.
—Joseph MortonDisclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.