Catalyst Paper Corp. has entered into a definitive agreement with a subsidiary of AbitibiBowater to acquire its Snowflake Ariz., recycled newsprint mill for around $161 million. The purchase price excludes trade receivables of about $19 million that are being retained by AbitibiBowater.
Financing for the deal will come from a combination of Catalyst Paper's revolving credit facilities and a proposed offering.
The Snowflake mill has an annual production capacity of around 375,000 metric tons. It includes two paper machines. When the deal is complete Catalyst Paper will have toital newsprint production capacity of about 980,000 metric tons.
The mill also houses a corrugating medium machine owned by Smurfit Stone Container Corp., which is operated by the Snowflake mill. A short line railroad at the site also is included in the deal.
Representatives from Catalyst note that the acquisition of the Snowflake mill assets will provide the company with one of the lowest-cost newsprint mills in North America, while owning a mill near one of the fastest growing metropolitan regions in the county.
Richard Garneau, president and CEO of Catalyst Paper, said:. "We are very pleased to announce this transaction as the Snowflake mill will improve our cost-competitiveness, strengthen our presence on the west coast of North America and provide us with a more freight logical way to serve existing as well as new customers.
"In addition, this acquisition will provide Catalyst with a natural hedge against Canadian dollar fluctuations and is particularly timely in the current environment of virgin fiber supply constraints."
The acquisition is expected to close by the end of the second quarter of this year. Along with the sale, both parties have agreed to a three-year supply contract under which AbitibiBowater will provide approximately 40 percent of the Snowflake mill's recycled fiber supply in the first year, decreasing in proportion over the life of the agreement. Catalyst Paper intends to source the remainder of the mill's fiber requirements.