Oct. 11, 2007 - Domtar Inc.said that it has received a notice purporting to terminate the agreement relating to the sale of its forest products business to Conifex.

According to Domtar, the alleged termination follows a written notice it received on October 1, 2007 from the Minister of Natural Resources and Wildlife for the province of Quebec purporting to revoke, effective September 14, 2007, Domtar’s forest license rights relating to the Grand-Remous and Malartic sawmills.

On June 22, Domtar had agreed to sell its forest products business, which includes sawmills and timber rights in Ontario and Quebec, to Conifex, a Montreal-based forestry and sawmilling company, for C$285 million. The purchase price included about C$50 million that Conifex would inject into the business as working capital.

Domtar believes that the Minister’s action is unlawful and the company said that it will "vigorously defend its rights."

Domtar delivered a letter to the Minister on October 3, 2007 demanding that the decision be revoked and the licenses be reinstated. The company said it intends to file formal proceedings before the Quebec Superior Court to enforce its rights.

In a press release, Domtar said it also believes that the purported unilateral termination of the agreement relating to the forest products business by Conifex Inc. is invalid pursuant to the terms of the agreement. While the consent of the Minister to the transfer of Grand-Remous, Malartic and other forest license rights is a condition to the closing of the transaction, the buyer would only have the right to terminate the agreement as of December 31, 2007 in the event that Domtar was not successful in challenging the revocation of these licenses and obtaining such consent by that date.

Domtar intends to vigorously enforce all of its rights under the agreement and continue to work diligently towards a closing of this transaction.

SOURCE: Domtar Inc.

See related story:
• Domtar to Sell Forest Products Business (6/22)