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Paper Excellence Group Will Acquire Resolute Forest Products for $2.7B

The sun beautifully illuminating the green treetops of tall beech trees in a forest clearing, panorama shot

Domtar Corporation, a wholly-owned subsidiary of pulp and paper company Paper Excellence Group, will acquire the outstanding shares of global forest products company, Resolute Forest Products Inc. (NYSE: RFP) in a deal that will further Paper Excellence’s growth strategy and help bring “complementary capabilities to lumber and pulp.”

Pursuant to the July 6 deal, Domtar, which provides fiber-based products, will acquire Resolute Forest Products for $20.50 per share in cash, totaling approximately $2.7 billion; this represents approximately a 64% premium on Resolute’s shares closing on July 5, 2022. Paper Excellence also has a contingent value right tied to potential softwood lumber duty deposit refunds of up to $500 million. Domtar is receiving acquisition financing from Barclays, CoBank and Bank of Montreal.

“Resolute is an ideal fit for our long-term growth strategy,” Patrick Loulou, Vice Chair and Chief Strategy Officer of the Paper Excellence Group, said in a press release. “It complements our existing pulp, paper and packaging businesses and adds capabilities in lumber and tissue. We have seen firsthand that Resolute prides itself on its great people, strong assets and a culture of excellence going back more than two hundred years.”

The filings state that Resolute will become a wholly-owned subsidiary of Domtar and it will continue to operate on a business-as-usual basis under its current Resolute name. Additionally, Resolute management will remain at the company’s headquarters in Montreal, Canada, and Paper Excellence plans to keep Resolute’s production locations and level of jobs.

According to the filings, the proposed acquisition will help the Paper Excellence Group expand its North America portfolio. Paper Excellence will also support and invest in Resolute’s growth strategy, such as investing in its lumber and pulp businesses and maximizing the value of its paper and tissue businesses.

“With this transaction, Resolute will accelerate its growth as it gains access to more tools, capital and opportunities to pursue our ambitions with the combined resources of the Paper Excellence Group,” Remi G. Lalonde, Resolute’s President and CEO, said in a press release. “This is good for employees and the communities where Resolute operates because we will continue to grow in a manner consistent with our core values of accountability, caring and trust that we hold dear. Together, we will form a stronger and more resilient, diversified forest products company, positioned to compete on a truly global scale, with a shared commitment to being a trusted business partner, dedicated to sustainability and to caring for its people and communities.”

The deal follows Paper Excellence’s acquisition of Domtar for approximately $3 billion last year.

The reverse triangular merger is expected to close as soon as possible pending stockholder and regulatory approval. The deal has been approved by Resolute’s board of directors and Fairfax Financial Holdings Limited, a large stakeholder in Resolute.

Resolute Forest Products’ legal advisors are Paul, Weiss, Rifkind, Wharton & Garrison LLP and Stikeman Elliott LLP and its financial advisor is CIBC Capital Markets.

Paper Excellence’s financial advisor is Barclays and its legal advisors are Latham & Watkins LLP, McMillan LLP and McCarthy Tetrault LLP.

Prior to the announcement, Resolute’s stock was valued at $12.49 on July 5. When the deal was announced on July 6, the stock was valued at $20.36. A few days later, stock closed at $19.82 on July 12.

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