The Matane mill produces 270,000 metric tons of high-yield pulp and sells the product for use in manufacturing paperboard, packaging, printing, and writing paper
Image: Sappi will acquire the Matane pulp mill in Quebec, Canada. Photo: courtesy of PRNewsfoto/Sappi Limited.
South African paper and pulp maker Sappi has agreed to acquire Rayonier Advanced Materials’ Matane pulp mill in Quebec, Canada in a deal worth $175m (£143.7m).
The Matane mill has the capacity to produce approximately 270,000 metric tons of high-yield pulp. It sells the products for use in manufacturing paperboard, packaging, printing, and writing paper.
The acquisition is expected to increase Sappi’s pulp integration for its packaging businesses in both North America and Europe as well as support the firm’s 2020Vision to grow in higher margin growth segments.
The deal will provide Sappi with cost reductions and decreased volatility
Commenting on the deal, Sappi CEO Steve Binnie said: “This acquisition will provide Sappi with both cost reductions and decreased volatility at a very competitive price per ton of pulp.
“Indeed, this is a more cost effective and efficient approach than building additional internal capacity for our North American and European mills. I am very pleased that we have taken another significant step towards realizing our 2020Vision goal.”
Sappi said that the deal will reduce its cost of pulp and the volatility of earnings through the pulp cycle, as well as enable supply to be increased over time to its mills in North America and Europe to meet the increasing demands.
Sappi plans to fund the transaction through internal cash resources as well as available debt facilities.
Planned to be completed during the fourth calendar quarter of 2019, the deal is subject to the approval from certain competition authorities.
Sappi North America CEO Mark Gardner said: “We are very pleased to be able to increase our pulp integration for our North American businesses.
“The acquisition eliminates the need to invest in a pulp expansion project at the Somerset Mill, which for the same investment would have delivered significantly less pulp.”
The Matane mill was purchased by the Rayonier Advanced Materials in 2017, as part of the acquisition of Canadian paper company Tembec for $807m (£665m).
Rayonier Advanced Materials chairman, president and CEO Paul Boynton said: “As part of our portfolio evaluation, the sale of the Matane mill allows us to divest a non-core asset while providing our stockholders with fair value.”