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Rubber and Wood May 27, 2016 12:30:44 PM

Catalyst Paper hints at potential acquisition by Indian papermaker

Carolina Curiel
ScrapMonster Author
According to the expression of intent, all common shares not held by the four key shareholders would be acquired for CAD $6.00 per share.

Catalyst Paper hints at potential acquisition by Indian papermaker

RICHMOND (Scrap Monster): The Richmond-based Catalyst Paper Corporation has announced that an Indian papermaker has expressed interest in purchasing its assets. The Mumbai, India-based Kejriwal Group International ("KGI") along with four largest shareholders of the Company has forwarded an expression of intent to buy the shares not held by them currently. A copy of the letter of intent is presently with the Catalyst’s Board of Directors, pending for final decision.

Principal Stakeholders

The four largest shareholders of the Company- Mudrick Capital Management, L.P., Cyrus Capital Partners, LP, Oaktree Capital Management, LP and Stonehill Capital Management LLC controls approximately 79% of the outstanding shares of the company. As per reports, they have already completed Schedule 13D filings with the United States Securities and Exchange Commission.

Expression of Intent

According to the expression of intent, all common shares not held by the four key shareholders would be acquired for CAD $6.00 per share. The 79% shares held by the shareholders would be exchanged for interests in a new junior convertible term loan. KGI has further committed to CAD $25 million in the company and additional CAD $35 million in a newly formed guarantor of the new term loans. In addition, existing credit facilities would have their maturities extended or refinanced.

Encouraged, but with caution

The news release issued by Catalyst Paper stated that the company’s board of directors is encouraged by the takeover proposal. According to the press release, the proposed acquisition is expected to provide significant amount of capital, which in turn would enhance and accelerate the company’s planned growth initiatives.

Meantime, the company cautioned that there is no assurance that the proposed transaction will be approved and a definitive agreement is reached between the interested parties. The company further noted that submission of copy of letter of intent is generally observed as a precursor to a transaction, but they are non-binding.

Stock prices surge

The shares of Catalyst Paper (TSX:CYT) reacted positively to the acquisition news. The shares skyrocketed by nearly 750% from 59 cents on Friday, May 20, to a close of $5 on Tuesday, May 24. This is the highest level in more than five years, exchange sources indicated.

Adverse market conditions

The acquisition is expected to bring in a relief for the company which has been struggling to keep pace with the fast changing market scenario. The demand for traditional printing and writing papers has been on a decline for quite some Proliferation of digital options has led to drastic reduction in paper usage and demand. The oversupply crisis has lowered the price across all grades of company products. The proposed deal would help the company to surge ahead during the ongoing difficult market conditions. Incidentally, the company had reported a net loss of $49 million in 2015.

About Catalyst Paper

Catalyst Paper Corporation is a pulp and paper company based in the Canadian city of Richmond, British Columbia. It operates five pulp mills and paper mills, producing a combined 1.8 tonnes of paper and 500,000 tonnes of market pulp annually. Catalyst Paper manufactures diverse printing papers such as coated freesheet, C1S, coated and uncoated groundwood, newsprint, directory, as well as market pulp. Customers include retailers, publishers and commercial printers in North America, Latin America, the Pacific Rim and Europe. The company is also ranked by Corporate Knights magazine as one among the 50 Best Corporate Citizens in Canada.

About KGI

The Kejriwal Group operates in the paper business. It was founded in 1975 and is based in Mumbai, India. It is engaged in the paper pulp and recycling industry, and provides paper as raw material for newspapers, stationery items, and book publishing.

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