A western forestry company acquires a major sawyer in the east of the country. Interfor of Burnaby, British Columbia, purchases Eacom Timber of Montreal for $ 490 million.
EACOM owns seven sawmills and two processing plants in Ontario and Quebec. In particular, it owns the former Domtar sawmills in Matagami, in the Nord-du-Québec region, and in Val-d’Or, in the Abitibi region. It also has a secondary wood processing plant in Sullivan, still in the land of Richard Desjardins. The Sullivan plant, in the Val-d’Or sector, notably manufactures bed bases.
In total, EACOM has a production capacity of nearly 1 billion board feet and access rights to approximately 3.6 million cubic meters per year. The company will operate under the Interfor brand. The company intends to keep the 600 jobs it has in Quebec. The acquirer expects synergies of 25 million, but ensures in a statement to keep the leaders and the main employees. Interfor intends to keep open the administrative office of EACOM, at 1100 René-Lévesque Boulevard West, in Montreal, “to ensure continued regional support for future operations.”
“Interfor’s operational excellence, financial strength, client relationships and North American portfolio will provide substantial opportunities for our employees,” said Kevin Edgson, President and CEO of Interfor in a statement. ‘EACOM.
Founded in 2008, EACOM bought out Domtar’s sawmills in 2010. It was privatized in 2013 by a division of the Kelso & Company investment fund.
The purchase price is C $ 490 million, plus approximately $ 61 million in EACOM countervailing duty and anti-dumping duty at closing.
It’s not expensive to pay, according to Scotia analyst Benoit Laprade. Excluding duties, Interfor pays approximately US $ 398 or CAN $ 498 per thousand board feet (mpp). “That’s about 11% less than its own valuation of US $ 450 per mpp and significantly less than any recent transaction in the southern United States,” he wrote in a note to his customers.
With this acquisition, Interfor diversifies into the northeast of the continent. The British Columbian company points out that 40% of EACOM’s production is destined for the Canadian market, therefore is not subject to the countervailing and anti-dumping duties of the Americans.
On a pro forma basis, Interfor increases its production capacity by a quarter, to nearly 5 billion board feet, of which 46% in the Southeastern United States, 16% in the Northwestern United States, 20% in Eastern Canada and 18% in British Columbia. Its revenues will reach 3.5 billion in 2022, compared to 2.1 billion in 2020. Adjusted earnings before interest, taxes and depreciation (EBITDA) go from 511 million in 2020 to 673 million in 2022.
Interfor estimates EACOM’s annual EBITDA at 90 million on average over a full business cycle. As a sign of the extraordinary profitability of foresters during the COVID-19 pandemic, EACOM’s EBITDA fell from 8 million in 2019 to 475 million for the 12-month period ended September 30.