PaperAge Magazine

Rayonier Advanced Materials to Acquire Tembec for $807 Million Including Debt

Paul Boynton and James Lopez Left: Rayonier Advanced Materials' Chairman, President and CEO, Paul G. Boynton and right: Tembec's President and CEO, James Lopez.

May 25, 2017 - Rayonier Advanced Materials Inc. and Tembec Inc. today announced a definitive agreement under which Rayonier Advanced Materials will acquire Tembec, providing the combined company with leading and complementary positions in key high purity cellulose end-uses and diversified earning streams from packaging, paper, high-yield pulp and forest products businesses. With its expanded geographic reach, enhanced R&D capabilities and broader, more flexible asset base, the combined company will offer customers exceptional product breadth across the spectrum of high purity cellulose products and create additional growth opportunities in packaging and forest products.

The transaction received the unanimous approval of the Boards of Directors of both companies.

Tembec shareholders will have the right to elect to receive either (i) C$4.05 in cash or (ii) 0.2302 of a share of Rayonier Advanced Materials common stock, for each Tembec common share. These elections are subject to proration to ensure that no more than 63% of the aggregate Tembec shares shall receive the cash consideration and no more than 37% will receive the stock consideration.

The purchase price of approximately US$807 million, including the assumption of US$487 million of debt net of cash, represents a multiple of 4.6 times LTM pro forma EBITDA after expected synergies or 6.3 times before synergies. For Tembec shareholders, the purchase price per share represents a 37% premium to its closing price on May 24, 2017.

Maintaining Tembec's operations and jobs in Canada and France

The Company expects to retain Canadian headquarters in Montreal, Québec and a presence in Ontario, and continue all Tembec operations. The Company will also proceed with Tembec's recently announced four-year investment plan for its Québec facilities and make additional investments in other key facilities and operations to further enhance the Company's growth potential and competitiveness.

"This transaction advances our growth objective to pursue strategic acquisitions where we can leverage our core competencies to provide significant long-term shareholder return," said Paul Boynton, Chairman, President and Chief Executive Officer of Rayonier Advanced Materials. "By joining forces, we are diversifying our product offering in high purity cellulose and expanding into the adjacent packaging and forest products markets with significant scale. With pro forma revenue of US$2 billion, the combined company will be poised to compete effectively in any market, benefit from greater product and geographic diversity, and provide an attractive value proposition for our shareholders."

Mr. Boynton added, "Following the transaction, our solid capital structure will enable us to make high-return investments to support the growth of Tembec's attractive businesses and product development capabilities to better serve customers. We look forward to working with Tembec's exceptional team, unions and other stakeholders to realize the abundant opportunities ahead."

James Lopez, President and Chief Executive Officer of Tembec, said, "Rayonier Advanced Materials is the ideal partner for us, given the complementary nature of our products, expertise, and resources. They are committed to our operations and employees in Canada and France and — above all — to the values we share. This combination will enable us to sustainably grow our business for the benefit of our customers, employees and communities. We are pleased that our shareholders will be able to participate in the company's future success through an ongoing equity ownership."

Rayonier Advanced Materials intends to finance the cash portion of the transaction with a combination of cash on hand and committed bank financing.

Rayonier Advanced Materials is a leading global supplier of high purity cellulose, a natural polymer commonly used in applications such as cell phones, computer screens, filters, textiles and pharmaceuticals. The company engineers dozens of customized products at its plants in Florida and Georgia, delivering unique properties, unparalleled consistency and exceptional quality. Rayonier Advanced Materials' facilities can produce approximately 485,000 tons of high purity cellulose and 245,000 tons of commodity products. With approximately 1,200 employees and revenues of US$870 million, Rayonier Advanced Materials is routinely ranked among the nation's top 50 exporters, shipping products to five continents, 35 countries and 80 ports around the world.

Tembec is a manufacturer of forest products — lumber, paper, pulp and high purity cellulose — and a global leader in sustainable forest management practices. Principal operations are in Canada and France. Tembec has approximately 3,000 employees and annual sales of approximately C$1.5 billion.

SOURCE: Rayonier Advanced Materials