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Tembec to be acquired by Florida cellulose maker

Rayonier preaches continuity, investment at Ontario operations
Tembec Kapuskasing
Tembec's Kapuskasing paper and sawmill

Forest products manufacturer Tembec is being acquired by Rayonier Advanced Materials of Florida in a US $807-million deal announced May 25.

A joint company news release said the acquisition will make Tembec a “larger, more competitive organization with the resources to invest in its growth and a commitment to continue all operations and maintain a strong presence in Québec, Ontario, and France. “

Rayonier maintains Tembec’s headquarters will remain in Montreal and all Ontario facilities will remain operational for now. Tembec's recently announced four-year investment plan for its Québec facilities will proceed as well as additional investments in other facilities and operations.

Tembec, a manufacturer of lumber, paper, pulp and high purity cellulose, was established in 1973 in Témiscaming, Quebec. The company is regarded as a global leader in sustainable forestry practices.

The company runs hardwood, softwood, paper, wood chip and papermaking operations in Hearst, Kapuskasing, Cochrane, Chapleau and Huntsville, employing more than 1,100 employees.

For Rayonier, the addition of Tembec will make it a global leader in producing high purity cellulose with diversified revenue streams in packaging, paper, pulp and forest products business. Rayonier is a global supplier of high purity cellulose, a natural polymer commonly found in cell phones, computer screens, filters and pharmaceuticals.

The company runs plants in Florida and Georgia with 1,200 employees and production of 485,000 tons of high purity cellulose and 245,000 tons of commodity products. Rayonier is ranked among America’s top 50 exporters.

The transaction’s been approved by the boards of directors of both companies. Fairfax Financial, a shareholder of Tembec, has advised that it is supportive of the transaction.

Tembec shareholders get their chance to weigh in on the deal at a special meeting to be held sometime in July.

The transaction will be carried out by way of a court-approved plan of arrangement and will require the approval of at least 66 2/3 per cent of the votes cast by Tembec shareholders.

Tembec shareholders will have the right to elect to receive either C$4.05 in cash or 0.2302 of a share of Rayonier Advanced Materials common stock, for each Tembec common share.

Subject to obtaining the required approvals, the transaction is expected to be completed in the second half of 2017.

"Rayonier Advanced Materials is the ideal partner for us, given the complementary nature of our products, expertise, and resources,” said Tembec president-CEO James Lopez in a statement.

“They are committed to our operations and employees in Canada and France and—above all—to the values we share. This combination will enable us to sustainably grow our business for the benefit of our customers, employees and communities. We are pleased that our shareholders will be able to participate in the company's future success through an ongoing equity ownership."

Rayonier chairman, president-CEO Paul Boynton said in a news release that it advances his company’s growth strategy to pursue “strategic acquisitions” to provide shareholder value in the long run."

"By joining forces, we are diversifying our product offering in high purity cellulose and expanding into the adjacent packaging and forest products markets with significant scale. With pro forma revenue of US$2 billion, the combined company will be poised to compete effectively in any market, benefit from greater product and geographic diversity, and provide an attractive value proposition for our shareholders.

"Following the transaction, our solid capital structure will enable us to make high-return investments to support the growth of Tembec's attractive businesses and product development capabilities to better serve customers. We look forward to working with Tembec's exceptional team, unions and other stakeholders to realize the abundant opportunities ahead."