B.C. lumber firm Interfor Corp. IFP-T laid the groundwork for additional growth in Japanese Canada this week by buying a 16.2-per-cent stake in GreenFirst Forest Merchandise Inc. GFP-T, a transfer analysts known as a prelude to a takeover.
Interfor purchased 28.7 million shares in GreenFirst for $56-million on Monday from pulp and paper firm Rayonier A.M. Canada G.P., which acquired the stake as a part of its 2017 takeover of Tembec Inc.
A number of parts of the transaction level to Interfor finally taking full management of GreenFirst, which has a $350-million market capitalization, in accordance with analysts.
Based mostly in Burnaby, B.C., Interfor is considered one of Canada’s largest lumber corporations, with a $2.2-billion market capitalization. In a press launch on Monday, Interfor stated it might be “creating plans or intentions or taking actions which relate to or would lead to a number of transactions involving securities of GreenFirst.”
Interfor additionally granted Rayonier “sure value safety provisions” on its shares, in accordance with the press launch. Analysts took this to imply that Montreal-based Rayonier would get more cash for its GreenFirst shares if Interfor subsequently makes a takeover bid at a better value. A spokesperson for Interfor declined additional touch upon the share buy.
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GreenFirst chief government Rick Doman stated in an e-mail: “This funding represents a terrific endorsement of each our marketing strategy and the standard of the property we personal.”
In February, Interfor expanded in Japanese Canada by buying Montreal-based Eacom Timber Corp. for $490-million. Analysts say Eacom’s operations, together with seven sawmills in Ontario and Quebec, complement Greenhill’s enterprise, which additionally options seven sawmills.
“We wonder if it will be doable to realize operational synergies by a extra significant transaction given overlapping asset footprints with Eacom,” analyst Paul Quinn at RBC Capital Markets stated in a report.
“A passive minority stake shouldn’t be the end-game,” analyst Benoit Laprade on the Financial institution of Nova Scotia stated in a report. “A mix with Eacom would make good enterprise sense.”
In 2003, the previous homeowners of Eacom and GreenFirst – Domtar Corp. and Tembec – proposed merging the 2 companies, however had been unable to shut the transaction. Mr. Laprade stated the 2 corporations “obtained some degree of consolation such a mixture would get the required approvals from Quebec and Ontario.”
Final June, Eacom founder Mr. Doman grew to become CEO at GreenFirst, after spending a yr on the corporate’s board. Mr. Doman’s household has deep ties to the forestry trade as founders of Western Forest Merchandise Inc.
The North American forest merchandise trade has been consolidating prior to now decade round its largest gamers, with Canadian market leaders akin to West Fraser Timber Co. Ltd. and Canfor Corp. increasing their geographic attain by acquisitions. Plenty of analysts have predicted GreenFirst might be a takeover goal.
Lumber costs have soared prior to now two years, owing to a surge in house constructing and pandemic-induced demand for renovations. That’s left many lumber corporations flush with money: Interfor highlighted the actual fact it had $1-billion of liquidity when it introduced its 2021 monetary leads to February.
Interfor has intensive operations in B.C. and the southeastern U.S., together with the sawmills in Ontario and Quebec it acquired this yr. The corporate’s 4,700 workers produce greater than 5 billion board toes of lumber yearly from 31 amenities.
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