Domtar sells forestry business to Eacom for $80 million


Montreal-based Domtar is selling its forest products business to lumber company Eacom Timber Corp. for $80 million, it has been announced.  The companies said the move will benefit Eacom as the US housing market recovers and allow Domtar to focus on its core activities in pulp and paper. In addition to the $80 million for the forestry products business, Domtar will receive between $30 million and $40 million in working capital in a cash-and-stock dealÔÇögiving it an eventual 11 percent stake in Eacom. Eacom said Domtar's mills and workforce in Ontario and Quebec will help provide more wood to meet a coming shortage. Eacom, which is only two years old, will acquire around 1,000 employees and five operating sawmills in various regions including Timmins, Nairn Centre and Gogama, Ontario; and Val-d'Or and Matagami, Quebec. The mills have about 3.5 million cubic meters of annual harvesting rights and a production capacity of nearly 900 million board feet. Eacom will also take on two non-operating mills in Ear Falls, Ontario and Ste-Marie, Quebec. The Vancouver-based┬ácompany currently owns just one idle mill, located in Big River, Saskatchewan, which it acquired at the start of 2010. The deal, which is expected to close during the second quarter, will see all of DomtarÔÇÖs forest products, employees and management team transition to Eacom. Commenting on the deal, John D. Williams, DomtarÔÇÖs president and chief executive officer, said: "Our forest products employees have demonstrated tremendous resilience throughout the years. Their sustained efforts to reduce costs and pursue the continuous improvement of operations have positioned the business well for the recovery.ÔÇØ He added: "Eacom will establish its headquarters in Montreal, QC and will become one of the largest publicly-traded lumber producers in Eastern Canada. The company will be a focused, well capitalized, standalone operation dedicated to the manufacturing of solid and value-added wood products." Rick Doman, president and chief executive officer of Eacom, added: "With this acquisition we pursue our vision of becoming a major softwood lumber producer and we look forward to integrating Domtar's leading wood products management team to ensure a smooth transition. We recognize that customers have choices in wood products suppliers, and we will work hard to secure their business, notably through our continued commitment to the FSC-certification.ÔÇØ Last month Domtar reported fourth quarter earnings of $124 million, reversing a $676 million loss in the same period a year earlier.