Resolute Forest Products Inc. announced it will acquire Conifex Timber Inc. ‘s three U.S. sawmills for $163 million, plus net working capital at closing, currently estimated at $7 million. The three sawmills have a combined production capacity of 550 million board feet and are located in Cross City, Florida, and Glenwood and El Dorado, Arkansas.
News of the acquisition was announced Dec. 24. The transaction is subject to regulatory approvals and customary conditions and is expected to close in the first quarter of 2020. Resolute said it intends to finance the acquisition with its existing credit facilities.
The sawmills produce construction-grade dimensional lumber and decking products from locally-sourced southern yellow pine for distribution within the United States. According to information from Resolute, production capacity for Cross City is 185 million board feet and it is currently operating on a two-shift basis. Glenwood’s capacity is also 185 million board feet and it is operating on a 1.5 shift basis. Recently idled, the El Dorado mill has a capacity of 180 million board feet.
Resolute said it plans to invest approximately $20 million to complete the necessary capital upgrades to gradually restart the El Dorado mill in 2021. The company added it “intends to build on Conifex’s significant capital investments in recent years, including $55 million previously invested in El Dorado, $23 million in Glenwood and $12 million in Cross City.”
“This transaction will provide immediate scale in the attractive U.S. South, with quality assets in a rich fiber basket, close to growing end-markets,” said Yves Laflamme, Resolute president and CEO. “Scaling our lumber business forms a key part of our stated transformation strategy. This transaction will also diversify our lumber production: when operating to capacity, almost 25 percent of our production will be in the U.S. South.”
Conifex said the net proceeds from the sale will be used to repay in full its outstanding lumber segment credit facility and for working capital and general corporate purposes.