Paper Excellence reaches deal to acquire Domtar for $3 billion

Deal has no impact on Prince Albert mill, where work is continuing ahead of plans to restart the facility as early as 2023

New signs were recently installed at the Mill's entrance. Submitted photo.

The recently-announced acquisition of pulp and paper company Domtar by Paper Excellence will have no impact on plans to restart the Prince Albert Pulp and Paper Mill, the company said Thursday.

On Tuesday, Paper Excellence announced it had entered into a “definitive agreement” to acquire Domtar for $55.50 per share in cash.

The agreement is pending shareholder and regulator approval.

The purchase price represents a premium of about 37 per cent to Domtar’s closing share price on May 3, 2021, the last trading day prior to reports emerging about a potential merger. The all-cash deal carries an enterprise value of about $ 3 billion.

In a press release, Paper Excellence said they plan to operate Domtar as a stand-alone business entity, meaning Domtar will retain its management team, while Paper Excellence will retain its corporate and production locations.

“We are excited to add Domtar and its employees to the Paper Excellence global family,” paper Excellence global CFO Joe Ragan said in a press release.

“This marks a major step in our global strategy of identifying well-positioned assets and positioning them for growth. Domtar is a natural fit for our culture of operational excellence. We are enthusiastic about entering the American market as we continually improve Paper Excellence’s ability to serve its expanding blue-chip customer base.”

The acquisition was approved unanimously by Domtar’s board of directors. It’s expected to close in the second half of 2021.

“This agreement enables our shareholders to realize certain and immediate cash value at a significant premium for their shares,” said John D. Williams, President and Chief Executive Officer of Domtar in a press release.

“This transaction validates our long-term strategic plan for our leading paper and pulp businesses, and for our continued expansion into packaging.”

Graham Kissack, Paper Excellence vice president of EHS and corporate communications, told the Herald Thursday that the deal has no impact on plans in Prince Albert.

“If anything, this deal strengthens Paper Excellence,” he said.

“It makes us more diversified and more competitive internationally. That helps us sell our product more effectively into markets.”

Paper Excellence purchased the mill from Domtar ten years ago and signed a ten-year non-compete clause. They announced earlier this year that they plan to reopen the Prince Albert facility and are aiming for a summer 2023 reopening.

Those plans are still on track, Kissack said.

“We’ve started planning work to prepare the site for the upcoming construction project. There is some demolition work and other things about to begin now. We’ve also started hiring people at the site.”

That includes a safety manager to oversee the construction project and a government and public relations manager to help move the mill project forward.

Paper Excellence’s careers page shows they are also looking for a desktop support analyst, human resources manager and project delivery director for the Prince Albert site.

The announcement made by Paper Excellence in February that it planned to reopen the Prince Albert mill was met with some skepticism locally. Kissack said he hopes the work done locally, including preparing for demolition and hiring additional positions, helps increase confidence in the project.

“I hope people look to what we’re doing … to increase the size of the team at the mill,” he said. “The project is ramping up and speeding up just as we talked about last time.”

Unifor Local 1120 represents the 185 staff who have recall rights to future jobs at the mill.

Those 185 people will be offered jobs at the mill first. If they don’t want to come back, they’ll lose their spot and new candidates will be recruited to fill the positions.

“This is a new era for Prince Albert,” Local 1120 president Rodney Staff said in February.

“It’s going to be a very attractive place to work. The job aspects of it are going to be fantastic. Young people in northern Saskatchewan are going to be given such a fantastic opportunity to have a well-paying job and benefits and everything that goes along with it.”

In February, Paper Excellence had announced that it has spent about $600,000 so far on engineering and design work at the mill. The investment was to determine what needs to be refurbished and to design new equipment for the mill. The company also installed new signs at the entrance in mid-January to signal their restart efforts.

In February, Kissack said that between getting the mill ready, arranging for fibre supply and getting the appropriate approvals in place, the company is targeting an opening of summer 2023. In addition to the 200 or so full-time employees for the mill site, he estimated that about 1,000 to 1,500 indirect jobs would result from the economic spinoff. He said the mill will produce just under 1,000 tonnes per day.

The mill has an annual capacity of 340,000 tones of northern bleached softwood kraft, pulp composed of longer fibres and used as reinforcement pulp in a variety of paper products including printing and writing paper, specialty grades and tissue products.

Paper Excellence estimates the capital and cost to restart the mill at about $550 million. It will consume an estimated 1,849,000 square metres of fibre each year.

The mill hasn’t operated since 2006 when it was closed in the second quarter. Domtar purchased the mill and assets from Weyerhauser in 2007 and began dismantling equipment in 2008.

With the facility not operating for 15 years, Kissack said Paper Excellence hopes to make improvements in the pulping and bleach plant areas to make a better product with a lighter environmental footprint. The work is set to “replace the heart of the mill” while using the existing recovery boiler, said to be one of the most modern in Canada.

In October, Pelican Lake First Nation and Witchekan Lake First Nation signed a letter of intent with Paper Excellence to build a collaborative relationship. Paper Excellence said that is partly related to fibre supply, and partly related to potential ownership and operation of ancillary operations to the plant.