Catalyst Paper is selling its American mills in three cities to a Chinese company for US$175 million, Catalyst announced Friday, May 25.
The Richmond-based company said with the sale it will turn its focus toward its British Columbia-based businesses. Catalyst Paper owns paper mills in Port Alberni, Crofton and Powell River.
Catalyst has entered into a sales and purchase agreement with ND Paper LLC, a wholly owned subsidiary of Nine Dragons Paper Ltd., which trades on the Hong Kong Stock Exchange.
Once the sale is final, ND Paper LLC will acquire Catalyst’s Rumford, Maine and Biron, Wisconsin mills along with associated staff at the company’s U.S. operations centre in Dayton, Ohio, according to a company press release. Catalyst will remain involved during a transition period as a condition of sale.
Catalyst president and CEO Ned Dwyer said the transaction allows Catalyst to re-pay a significant portion of its debt “and focus on our British Columbia operations.
“We continue to pursue opportunities to improve the competitiveness of our company and our industry,” said Dwyer in a statement. “We also continue to work with the provincial and federal governments in our defence against the unwarranted imposition of U.S. countervailing and anti-dumping duties.”
The sale will have a positive effect on mills such as Port Alberni’s or Crofton’s, Catalyst vice-president of environment, health and safety Graham Kissack said. “In terms of the influence this has on Port Alberni’s mill, it’s actually positive because we’ve generated a substantial portion of cash from the transaction and we’re using that cash to pay down our debt,” Kissack said.
That means B.C.-based mills won’t be carrying as much debt, and Catalyst will be able to lower cost to service debt.
“The decision’s been made for now to pay down the debt,” Kissack added. “It was seen as our best approach forward at this time. We’re putting a great deal of focus in improving competitiveness in all three of our B.C. mills.”
Catalyst purchased the three American mills in July 2015 and put “a very effective team of Catalyst employees” in place to turn them around, he added. The management team “made some pretty substantial changes in those mills”—so much that Catalyst was able to sell them for three times the original purchase price, Kissack said.
The transaction is expected to close by the end of the second quarter upon the favourable vote of Catalyst’s shareholders, with a meeting of shareholders scheduled for June 11, 2018. The company said its three major shareholders, representing 87 percent of the outstanding shares, have agreed to vote in favour of the sale at the June meeting.