Canfor terminates $981 million deal with Great Pacific
VANCOUVER - Canadian lumber giant Canfor has terminated its deal to go private under Great Pacific Capital after it failed to achieve the required votes.
In October, Canfor agreed to sell its remaining shares to Great Pacific Capital at a price of $16 per common share - or around $981.6 million. Great Pacific is owned by 90-year-old Canadian billionaire Jim Pattison, who already owns 51 percent of Canfor. The deal was first proposed in August.
But now, the company says the deal is off the table.
With a deadline of December 16, the minority shareholder vote required to approve the deal was not achieved. Around 45 percent of the minority votes were in favor of the deal, which the company says falls below the majority required. Canfor will remain public.
Ongoing challenges in the Canada's forest products industry, including high log costs, influenced the October agreement. That same month, Canfor reported an operating loss of $124 million for the third quarter - compared to a second quarter loss of $49.7 million.
“It is unknown how long the challenging industry conditions may persist and uncertain when financial results may improve as a result of capacity rationalization in British Columbia,” said the company, who added that the offer represented a fair market value.
When the offer was made in August, Great Pacific said privatization would be a big help to the company, helping eliminate "significant administrative expenses" and that a cash investment would help stabilize the company.
Canfor is an integrated forest products company based in Vancouver, British Columbia, with interests in British Columbia, Alberta, North and South Carolina, Alabama, Georgia, Mississippi and Arkansas, as well as in Sweden with its recent majority acquisition of Vida Group. Canfor produces primarily softwood lumber and also owns a 54.8 percent interest in Canfor Pulp Products Inc., which is one of the largest global producers of market northern bleached softwood kraft pulp and a leading producer of high performance kraft paper.

Canfor has been curtailing production as of late. In July, Canfor shut down one British Columbia sawmill and permanently eliminated a shift at another. In combination with previous curtailments and the shutdown of its Vavenby sawmill, Canfor will lose 400 million board feet of lumber. Canfor sold cutting rights to its Vavenby mill to Interfor in June.

British Columbia - Canada's largest lumber-producing province - exported just over 514 million board feet of lumber to the U.S. in October 2018, down from 645 million board feet from the same time 2017. Many Canadian lumber leaders have taken a hit - including West Fraser, Conifex, and Interfor - and restricted lumber production. West Fraser and Canfor have curtailed production more than once.
All cited challenging lumber markets, high log costs, log supply constraints, falling lumber prices, and U.S. import tariffs as factors.
Softwood lumber import tariffs of around 21 percent were levied onto Canada last year. The National Association of Home Builders (NAHB) told MarketWatch that those tariffs are restructuring the entire lumber global supply chain - incentivizing U.S. buyers to import from overseas rather than ship lumber across the Canadian border.
Russia surpassed Canada as the world's leading exporter of softwood lumber.



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About the author
Robert Dalheim

Robert Dalheim is an editor at the Woodworking Network. Along with publishing online news articles, he writes feature stories for the FDMC print publication. He can be reached at [email protected].