Domtar to Sell Forest Products Business

June 22, 2007 - Domtar Corp. today announced that it has entered into an agreement for the sale of its forest products business to the newly created Conifex Inc. for approximately CDN$285 million including an estimated CDN$50 million of working capital.

The deal is subject to government approvals for the transfer of forest licences, regulatory approvals and customary closing conditions. Closing is expected before the end of the year, Domtar said.

“Through this transaction, Domtar is reinforcing its focus as the North American market leader in fine paper while obtaining capital to further reduce its debt. As indicated in the past, softwood sawmilling operations are not core to our fine paper business,” said Raymond Royer, president and CEO of Domtar. “The strategic timing of this transaction combined with the terms of the sale provided the best alternative for our shareholders.”

The deal is comprised of the Ear Falls, Nairn Centre, Timmins and White River sawmills in Ontario and the Grand-Remous, Lebel-sur-Quévillon, Malartic, Matagami, Ste-Marie and Val-d’Or sawmills in Québec, as well as the Sullivan remanufacturing mill also in Val d’Or, Québec.

The sawmills have approximately 4.8 million cubic metres of annual harvesting rights and a production capacity of approximately 1.1 billion board feet, the company said.

Also included in the transaction are Domtar’s interests in the joint ventures of Elk Lake Planing Mill Limited, Gogama Forests Products Inc., Nabakatuk Forest Products Inc., Olav Haavalsrud Timber Company Limited and Anthony-Domtar Inc. Domtar’s sawmills in Saskatchewan are not included in the company added.

“When we selected the buyer, we also took into account a number of important considerations such as Conifex’s commitment to growth and to FSC certification, its experience and deep knowledge of the lumber industry, and its undertaking to bring Domtar’s Forest Products management team and employees onboard,”Royer said. “Meanwhile, until closing, it will be business-as-usual for our employees and customers.”

Ken Shields, Chairman of the Board of Directors for Conifex, said, “Over the next three years we will be building on this solid foundation and investing up to CDN$50 million in our facilities to lower our costs and increase our productivity. With the support of the existing management team and the active involvement of staff, we are confident that we will become a leader in forestry and sawmilling in Eastern Canada.

"We are also pleased that Domtar has accepted in principle to extend its support by investing in our company an amount equal to the lesser of CDN$35 million or a 19,9% participation, subject to the conclusion of a definitive agreement to the satisfaction of Domtar," Shields added.

Domtar said it will provide Conifex with transition services, including information technology and human resources management, for a period of 6 to 12 months following closing.

SOURCE: Domtar Corp.

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