In July Interfor Corporation announced an investment of millions to upgrade mill in Gilchrist and support 450 local jobs. Interfor has turned its Gilchrist Mill into a world-class specialty operation to produce its new top-of-the line Reserve Pine products for the niche premium board market. Last week it announced an agreement to acquire four sawmills from Simpson Lumber in U.S. Southeast and Pacific Northwest.
Interfor Corporation has reached agreement with Simpson Lumber Company, LLC to acquire Simpson’s sawmill operations in Meldrim, Georgia, Georgetown, South Caroline, Longview, Washington and Commencement Bay, WA (collectively the “Sawmill Operations”). The Sawmill Operations are located within geographic proximity of Interfor’s sawmills in both the US Southeast and Pacific Northwest and will fit within the Company’s existing operating infrastructure.
The Sawmill Operations have a combined annual lumber capacity of 750 million board feet1 and are expected to produce 555 million board feet in 2014. As a result of this transaction, Interfor’s total capacity will increase by 30 percent to 3.1 billion board feet, reinforcing its position as the fastest growing lumber company in the world. The Company’s lumber capacity in the US Southeast and Pacific Northwest will total 1.2 billion board feet and 900 million board feet, respectively, representing 67 percent of the Company’s total pro forma capacity.
For the nine months ended September 30, 2014, the Meldrim, Georgetown and Longview sawmills generated combined EBITDA of $16 million. In addition, these sawmills have significant upside potential from capital projects that are currently underway as well as from other operational initiatives.
For the nine months ended September 30, 2014, the Commencement Bay operation generated EBITDA of $3 million. The Commencement Bay sawmill is located at the Port of Tacoma and is a modern sawmill that was built in 2001. The total invested capital for the sawmill is approximately $90 million. In 2004, the sawmill produced almost 400 million board feet, but is expected to produce approximately 165 million board feet in 2014. Simpson is in the final stages of a $5 million capital project at Commencement Bay that will enhance the sawmill’s log processing flexibility and operating efficiency.
Interfor believes there are additional non-capital initiatives that could materially improve the financial performance of the sawmill and further enhance the financial returns from the transaction.
“This transaction is another important milestone for Interfor,” said Duncan Davies, Interfor’s President and CEO. “The Simpson operations are a great strategic fit with our platforms in the US Southeast and Pacific Northwest, with significant operational and financial upside. Equally important is the deal structure that has two distinct components: the acquisition of three profitable sawmills at values that will create immediate accretion and the acquisition of a fourth sawmill using a contingent payment structure that ties the ultimate purchase price of that sawmill to its future results.”
Interfor’s cash consideration for the Sawmill Operations will be $94.7 million plus working capital and adjustments related to Simpson’s pre-closing capital expenditure commitments, plus a series of contingent future payments tied to the financial performance of the Commencement Bay sawmill.
