Canada / United States | North American paper producer Catalyst Paper Corp. has struck a deal with a subsidiary of AbitibiBowater to acquire a recycled newsprint mill in Snowflake, Arizona, United States for US$161 million, financed partly by a proposed C$125-million rights offering. The price excludes trade receivables of about US$19 million that are being retained by Montreal-based AbitibiBowater.
The acquisition will increase Catalyst Paper's total newsprint production capacity to about 980 000 tonnes. ‘The Snowflake mill, a leading recycled newsprint producer with annual production capacity of 375 000 tonnes on two modern paper machines, is regarded as one of the lowest-cost newsprint mills in North America,’ Vancouver, Canada-based Catalyst says.
The two companies have also agreed to a three-year supply contract under which AbitibiBowater will provide about 40% of the Snowflake mill's recycled fibre supply in the first year, decreasing in proportion over the life of the agreement.
The mill also houses a corrugating medium machine owned by Smurfit Stone Container Corp. and operated by the Snowflake mill. In 2006, the Snowflake mill generated earnings before interest, taxes, depreciation and amortization (EBITDA) of US$58 million on net revenues of US$195 million. For the last 12 months ending Sept. 30, 2007, the mill generated EBITDA of US$30 million on net revenues of US$185 million.
Richard Garneau, CEO of Catalyst Paper says: ‘this acquisition will provide Catalyst with a natural hedge against Canadian dollar fluctuations and is particularly timely in the current environment of virgin fibre supply constraints.’ Catalyst Paper intends to source the remainder of the mill's fibre requirements directly from the recycled fibre market in western North America.
