Tembec-Rayonier Acquisition Deal Jumps Another Hurdle

MONTREAL (Scrap Monster): The deal that involves acquisition of all of the outstanding shares of Tembec Inc. by Florida-based Rayonier Advanced Materials has received approval from the Quebec Superior Court. The Court approval followed the final hearing which took place on August 7^th.

With this approval, the deal has cleared another hurdle, thereby boosting the entire acquisition plan. Earlier, the transaction deal had received necessary clearance from Germany’s Federal Cartel Office and approval by majority shareholders. The transaction is expected to close during the fourth quarter of the current year, subject to clearance from regulatory authorities in China as well as Canada.

In its initial bid, Rayonier had offered to pay $4.05 in cash or 0.2302 shares of the new entity for every single share that they own, subject to a limit of 63% on the cash portion of the offer. However, Oaktree Capital Management LP and Restructuring Capital Associates LP-two of the major shareholders whose combined share in Tembec exceeds one-third- had opposed the deal, stating that the offer was too low. They had threatened to vote against the deal if the offer is not increased. Incidentally, opposition by one-third of the total shareholders is bound to make deal null and void.

Following this, Rayonier later came up with a revised offer. In accordance with the new deal, Rayonier agreed to pay $4.75 in cash or 0.2542 of Rayonier shares for every Tembec share, subject to the condition that amount of cash to be paid will be limited to two-thirds of the deal. The revised deal valued at $1.1 billion was endorsed by both Oaktree Capital Management LP and Restructuring Capital Associates LP. In the voting held during the special meeting July 27^th, 95.04% of Tembec shareholders voted in favor of the deal.

As per sources, the acquisition is expected to help Rayonier AM to diversify its product line and expand across geographies. Also, it would ensure flow of liquidity towards the planned multi-dollar investment plans by Tembec at its Quebec facilities, mainly at its specialty cellulose operation at the Temiscaming manufacturing site. According to estimates, the combined entity is expected to generate annual EBITDA earnings of $400 million at annual sales of around $2 billion.

Rayonier Advanced Materials is a global supplier of high purity cellulose with plants in Florida and Georgia. Tembec is a leading manufacturer of forest products with operations in North America and France.