Business News
Neenah Paper to Complete Transformation to Premium and Specialty Paper Company with Agreement to Sell Pictou Pulp Mill
Thursday 15. May 2008 - Neenah Paper, Inc. (NYSE:NP) announced today that it had signed a definitive agreement to sell its Pictou pulp mill to Northern Pulp Nova Scotia Corporation ("Northern Pulp"), a new operating company of Atlas Holdings LLC ("Atlas") and Blue Wolf Capital Management LLC ("Blue Wolf").
The mill, located in Nova Scotia, Canada consists of one machine with annual capacity of approximately 270,000 metric tons of pulp. In 2007, approximately 90 percent of the mill’s production was northern bleached softwood kraft pulp. The sale agreement pertains only to the Pictou mill and associated woodlands operations; Neenah Paper will retain the 500,000 acres of timberlands that it owns in Nova Scotia.
Neenah expects to pay approximately $15 to $20 million to Northern Pulp to assist the new company in its transition to stand-alone status. Payments will be made in two installments, the first at the time of closing and the second in the third quarter. Final amounts will be subject to adjustments based on levels of working capital, capital spending and costs incurred during the recent mill annual maintenance down. As part of the terms of the sale, Northern Pulp will assume all assets and liabilities associated with the Pictou operations, as well as existing customer contracts, supply agreements, labor agreements and pension obligations. In addition, Northern Pulp and Neenah Paper have agreed upon a market-based fiber supply agreement to ensure ongoing fiber supply to the mill.
“This sale is the last major step of our strategy over the past three years to transform ourselves from a commodity pulp and paper company to a performance-based specialty products and premium fine paper company. Without pulp, Neenah Paper will be less capital intensive and less volatile and we can focus on our core businesses and the sale of our remaining timberlands,” said Sean Erwin, Chief Executive Officer and Chairman of the Board. “We are pleased with the sale to Atlas and Blue Wolf, as they are experienced owners and operators of pulp and paper mills who are committed to long-term success in these industries. While we will make an initial payment under the agreement, overall we expect to be over $20 million cash positive as a result of tax benefits that result from the write-off and sale of the mill.”
The transaction is expected to close in the second quarter and is subject to customary closing conditions, including various governmental consents, pension transfer requirements and certain contractual assignments.