(All financial information is in U.S. Dollars
unless otherwise stated)
Strategic transaction to accelerate Paper
Excellence's growth strategy, bringing complementary capabilities
in lumber and pulp
MONTREAL, July 6, 2022
/PRNewswire/ - The Paper Excellence Group (the "Group"),
through its wholly-owned subsidiary Domtar Corporation ("Domtar"),
a global diversified manufacturer of pulp and specialty, printing,
writing, and packaging papers, and Resolute Forest Products Inc.
("Resolute") (NYSE: RFP) (TSX: RFP), a global forest products
company, have entered into an agreement under which Domtar will
acquire all of the outstanding common shares of Resolute stock.
With this addition to its family of companies, the Paper
Excellence Group will further build out its portfolio in
North America following the
successful acquisition of Domtar last year.
Patrick Loulou, vice chair and
chief strategy officer of the Paper Excellence Group, commented,
"We are excited to welcome Resolute and its employees to the Paper
Excellence family. Resolute is an ideal fit for our long-term
growth strategy. 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."
Resolute will become a wholly-owned subsidiary of Domtar, under
the auspices of the Group, and continue to operate on a
business-as-usual basis under the Resolute name. The Resolute
management team will remain in place at the company's headquarters.
Considering the quality workforce available with Resolute and
Domtar, Montreal will become an
important hub for the Group's North American businesses.
Furthermore, the Group plans to retain Resolute's production
locations and levels of jobs.
Growing Together
"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," stated Remi G. Lalonde,
Resolute's president and chief executive officer. "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."
As part of its commitment to building a premier North American
diversified forest products company and creating long-term growth,
the Group intends to support Resolute management's existing growth
strategy, focused on strategic investments in its lumber and pulp
businesses, and maximizing the value of its paper and tissue
businesses. It also plans to undertake a detailed feasibility study
for the eventual conversion of Resolute's Gatineau, Quebec, newsprint mill to the
production of packaging paper.
"This is a good example of how the Paper Excellence Group's
diversified business, financial resources, and technical
capabilities can open up new strategic avenues for assets that may
otherwise face an uncertain future. This is but one example of our
support and intention to implement significant investments aligned
with Resolute's strategic plan for the future," concluded Mr.
Loulou.
Furthermore, the Group intends to form long-term partnerships
with one or more universities in Quebec and Ontario to spearhead innovation in the field
of fiber-based biomaterials.
Transaction Details
The cash portion of the merger consideration represents a
premium of approximately 64% to Resolute's closing share price on
NYSE on July 5, 2022. The cash
consideration represents an enterprise value of approximately
$2.7 billion, including pension
liabilities and excluding the Contingent Value Right (CVR) on
softwood lumber duty deposit refunds.
"This agreement offers our stockholders the opportunity to
realize a significant premium for their shares in cash, plus
additional value with contingent value rights tied to the
prospective recovery of accumulated deposits on estimated softwood
lumber duties through the second quarter," added Mr. Lalonde.
The transaction will be carried out by way of a merger of
Resolute with a newly created subsidiary of Domtar, providing for
conversion of each share of Resolute common stock into the right to
receive $20.50 per share, together
with a CVR entitling the holder to a share of future softwood
lumber duty deposit refunds. Each share, on a fully diluted
basis at closing, will be entitled to receive one CVR.
"The addition of Resolute enables us to continue executing our
long-term business plan to drive growth to the benefit of all
stakeholders," said John D.
Williams, president and chief executive officer of Domtar.
"After the close of the transaction, the Paper Excellence Group
will own or operate a collection of diverse, strategic assets
across North America that allows
us to deliver a wider range of high-quality products to our
customers. This transaction continues to demonstrate the strong
belief in the potential of our business model and we look forward
to continuing to operate successfully and efficiently into the
future."
Under the CVR, stockholders will receive any refunds on
approximately $500 million of
deposits on estimated softwood lumber duties paid by Resolute
through June 30, 2022, including any interest thereon, net of
certain expenses and of applicable tax and withholding. Any
proceeds attributable to the CVR will be distributed proportionally
to CVR holders, and the value will ultimately be determined by the
terms and timing of the resolution of the softwood lumber dispute
between Canada and the United States. The terms and timing of
such resolution is uncertain. The CVRs will not be tradeable and
will be subject to prohibitions on transfer.
Resolute stockholders will have the opportunity to vote on the
transaction at a stockholders' meeting to be held in early fall.
The merger will require the approval of a majority of the
outstanding shares of Resolute.
Fairfax Financial Holdings Limited, a significant stockholder of
Resolute, has entered into a voting and support agreement to vote
its shares in favor of the transaction. As of July 5, 2022, Fairfax Financial Holdings held
approximately 30,548,190 shares, or 40% of the outstanding shares
as of that date.
A full description of the transaction will be outlined in the
proxy statement of Resolute, to be filed with the U.S. Securities
and Exchange Commission ("SEC") at
www.sec.gov/edgar/browse ("EDGAR"), and with the Canadian
securities regulators on the System for Electronic Document
Analysis and Retrieval ("SEDAR") at www.sedar.com and mailed to
stockholders of Resolute.
In addition to stockholder approval, the transaction is subject
to applicable regulatory approvals and the satisfaction of certain
other customary closing conditions.
Approvals and
Recommendation
The board of directors of Resolute unanimously determined that
the terms of the transaction are fair to, and in the best interests
of, Resolute and its stockholders and resolved to recommend that
Resolute stockholders vote for the transaction.
The transaction is expected to close as soon as possible
following stockholder and regulatory approvals, and satisfaction of
other customary closing conditions, which is currently expected in
the first half of 2023.
Advisors
Barclays is serving as exclusive financial advisor to Paper
Excellence, and Latham & Watkins LLP, McMillan LLP, and
McCarthy Tétrault LLP, are serving as legal advisors. Barclays,
CoBank, and Bank of Montreal are
providing acquisition financing to Domtar in connection with the
transaction.
CIBC Capital Markets is serving as exclusive financial advisor
to Resolute, and Paul, Weiss, Rifkind, Wharton & Garrison LLP,
and Stikeman Elliott LLP are serving as legal advisors.
Additional Information and Where
to Find It
In connection with the proposed transaction, Resolute intends to
file the relevant materials with the SEC, including a proxy
statement on Schedule 14A. Promptly after filing its definitive
proxy statement with the SEC, Resolute will mail the definitive
proxy statement and a proxy card to each stockholder entitled to
vote at the special meeting relating to the transaction. The
materials to be filed by Resolute will be made available to the
company's investors and stockholders at no expense to them and
copies may be obtained free of charge on Resolute's website at
www.resolutefp.com. In addition, all of those materials will be
available at no charge on the SEC's website at www.sec.gov.
Investors and security holders will also be able to obtain copies
of the proxy statement (when available) and other documents filed
with Canadian securities regulatory authorities by Resolute at no
charge through the website maintained by the Canadian Securities
Administrators at www.sedar.com. Investors and stockholders of
Resolute are urged to read the proxy statement and the other
relevant materials when they become available before making any
voting or investment decision with respect to the proposed
transaction because they contain important information about
Resolute and the proposed transaction.
Resolute and its directors, executive officers, other members of
its management and employees may be deemed to be participants in
the solicitation of proxies of Resolute stockholders in connection
with the proposed transaction under SEC rules. Investors and
stockholders may obtain more detailed information regarding the
names, affiliations and interests of Resolute's executive officers
and directors in the solicitation by reading Resolute's proxy
statement for its 2022 annual meeting of stockholders, the Annual
Report on Form 10-K for the fiscal year ended December 31, 2021, and the proxy statement and
other relevant materials that will be filed with the SEC in
connection with the proposed transaction when they become
available. Information concerning the interests of Resolute's
participants in the solicitation, which may, in some cases, be
different than those of the company's stockholders generally, will
be set forth in the proxy statement relating to the proposed
transaction when it becomes available.
Cautionary Statements Regarding
Forward-Looking Statements
Statements in this document that are not reported financial
results or other historical information of Resolute are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements include, for example, statements included in this
document relating to the potential benefits of the proposed
transaction between Resolute and Domtar Corporation; the
prospective performance and outlook of Resolute's business,
performance and opportunities; the ability of the parties to
complete the proposed transaction and the expected timing of
completion of the proposed transaction; as well as any assumptions
underlying any of the foregoing. Forward-looking statements may be
identified by the use of forward-looking terminology such as the
words "should," "would," "could," "will," "may," "expect,"
"believe," "see," "intends," "continue," "positioned," "maintain,"
"remain," "build," "pursue," "accelerate," "plan," "grow," "allow,"
"look," "provide," "create," "support," "estimated," "drive,"
"maximize" and other terms with similar meaning indicating possible
future events or potential impact on Resolute's business or its
stockholders. The reader is cautioned not to place undue reliance
on these forward-looking statements, which are not guarantees of
future performance. These statements are based on management's
current assumptions, beliefs, and expectations, all of which
involve a number of business risks and uncertainties that could
cause actual results to differ materially. Many factors could cause
actual future events to differ materially from the forward-looking
statements in this document, including but not limited to:
uncertainties as to the timing of the proposed transaction; the
risk that the proposed transaction may not be completed in a timely
manner or at all; the possibility that competing offers or
acquisition proposals for Resolute will be made; the possibility
that any or all of the various conditions to the consummation of
the proposed transaction may not be satisfied or waived, including
the failure to receive any required regulatory approvals from any
applicable governmental entities (or any conditions, limitations or
restrictions placed on such approvals); the occurrence of any
event, change or other circumstance that could give rise to the
termination of the merger agreement, including in circumstances
that would require Resolute to pay a termination fee or other
expenses; the inability to recover softwood lumber duty refunds in
a timely manner or at all; the effect of the pendency of the
proposed transaction on Resolute's ability to retain and hire key
personnel, its ability to maintain relationships with its
customers, suppliers and others with whom it does business, its
business generally or its stock price; and risks related to
diverting management's attention from the company's ongoing
business operations. In addition, please refer to the documents
that Resolute files with the SEC on Forms 10-K, 10-Q and 8-K. These
filings identify and address other important risks and
uncertainties with respect to Resolute and its business that could
cause events and results to differ materially from those contained
in the forward-looking statements set forth in this document. All
forward-looking statements in this document are expressly qualified
by the cautionary statements contained or referred to above and in
Resolute's other filings with the SEC and the Canadian securities
regulatory authorities. Resolute disclaims any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except
as required by law.
About Resolute Forest
Products
Resolute is a global leader in the forest products industry with
a diverse range of products, including market pulp, tissue, wood
products and papers, which are marketed in over 60 countries. The
company owns or operates some 40 facilities, as well as power
generation assets, in the United
States and Canada. Resolute
has third-party certified 100% of its managed woodlands to
internationally recognized sustainable forest management standards.
The shares of Resolute trade under the stock symbol RFP on both the
New York Stock Exchange and the Toronto Stock Exchange.
Resolute has received regional, North American and global
recognition for its leadership in corporate social responsibility
and sustainable development, as well as for its business practices.
Visit www.resolutefp.com for more information.
About Domtar
Domtar is a leading provider of a wide variety of fiber-based
products including communication, specialty and packaging papers,
market pulp and airlaid nonwovens. With approximately 6,400
employees serving more than 50 countries around the world, Domtar
is driven by a commitment to turn sustainable wood fiber into
useful products that people rely on every day. Domtar's principal
executive office is in Fort Mill, South
Carolina and Domtar is part of the Paper Excellence group of
companies. To learn more, visit www.domtar.com.
About Paper Excellence
The Paper Excellence Group is a privately-held holding company
that oversees individual pulp and paper business units. Its
operations include the manufacturing of pulp and specialty,
printing and writing, and packaging papers, producing over 7
million tons annually with a workforce of over 10,000 in its nearly
40 locations across the Americas and Europe. For more
information on Paper Excellence, please visit
www.paperexcellence.com.
View original
content:https://www.prnewswire.com/news-releases/paper-excellence-group-enters-into-definitive-agreement-to-acquire-resolute-for-20-50-per-share-and-one-contingent-value-right-tied-to-potential-duty-deposit-refunds-of-up-to-500-million-301581311.html
SOURCE Resolute Forest Products Inc.