EACOM buys Domtar's forest products business

April 9, 2010
by Purchasingb2b Staff

Richmond, British Columbia-based EACOM Timber Corporation has acquired Montreal, Quebec-based Domtar Corporation’s forest products business.

The deal was announced in late March and is expected to close at the end of the second quarter. It is worth $80 million, plus elements of working capital estimated at $30 million to $40 million.

Domtar will also receive 19 percent of the proceeds in shares of EACOM.

What EACOM gets

The transaction includes five operating sawmills, located in Ontario (in Timmins, Nairn Centre and Gogama) and Quebec (in Val-d’Or and Matagami).

It also includes two non-operating sawmills, located in Ear Falls, Ontario and Ste-Marie, Quebec.

The sawmills have approximately 3.5 million cubic metres of annual harvesting rights and a production capacity of close to 900 million board feet.

Also included in the transaction are the Sullivan remanufacturing facility in Quebec and Domtar’s interests in two investments: Anthony-Domtar Inc and Elk Lake Planing Mill Limited.

Why now

EACOM is considered a new player in the industry. In an interview with Business News Network, the company’s president and CEO, Rick Doman, said the company plans to operate the newly acquired assets more efficiently and sustainably and get back to capacity as soon as possible.

When asked why the company made the acquisition now, Doman explained that EACOM predicts that while the US housing market—a major contributor to sales—is currently very slow, it will improve.

Doman said he expects to see an increase to about 1.3 million housing starts by 2013—"a steady improvement from the current 600,000 housing starts.”

Doman also explained supply reductions out of British Columbia and Europe (particularly Sweden, Finland, Germany and Austria) will create demand for lumber.

“That, coupled with the tax on Russian log exports, is having an impact on global softwood lumber supply,” explained Doman.

“We think there’s a softwood lumber shortage developing that will emerge as demand continues to recover.”