Business News
Catalyst completes acquisition of Snowflake newsprint mill and Subscription Receipts exchanged for Common Shares
Friday 11. April 2008 - Catalyst Paper Corporation (TSX:CTL) has completed its US$161 million acquisition of the recycled newsprint mill in Snowflake, Arizona.
A definitive agreement to acquire this operation from an AbitibiBowater subsidiary was announced in February, and its finalization represents the first extension of Catalyst’s manufacturing base beyond Canada.
The Snowflake mill, located about 290 km (180 miles) from Phoenix, Arizona, is one of the lowest-cost newsprint mills in North America. Its annual production capacity is 375,000 tonnes of 100 per cent recycled newsprint. This brings Catalyst’s total newsprint production capacity to approximately 980,000 tonnes, complementing its mechanical specialty paper capacity of some 1.1 million tonnes.
“Increasing our recycled newsprint capacity strengthens our ability to meet demand for this grade in large urban regions,” said Richard Garneau, President and Chief Executive Officer. “The Snowflake mill is well-located to serve growing population centres in western North American and is the freight-logical supplier to a number of key markets.”
The acquisition is expected to provide annual synergies of US$10 million through cost-savings in purchasing and related services, as well as optimization of product distribution networks. It also provides Catalyst with fibre and currency diversification.
Snowflake has a record of performance and profitability, reflecting positive labour relations and modern equipment. It is an energy self-sufficient mill with the potential to sell some excess electricity to the power grid. Snowflake’s production will be marketed under Catalyst’s Marathon newsprint brand.
The acquisition was financed, in part, through a C$125 million rights offering resulting in the issue of approximately 167.1 million Subscription Receipts. With the completion of the Snowflake Acquisition, each of the Subscription Receipts was deemed exercised for one fully paid common share of Catalyst. Share certificates representing the common shares will be distributed to holders of the Subscription Receipts shortly. The balance of the purchase price for the acquisition was funded by drawings under Catalyst’s secured revolving operating facility.