For B.C. billionaire Jim Pattison, paying an extra 29 cents a share would be a deal breaker in his quest to take full control of forestry firm Canfor Corp.
Mr. Pattison, who owns 50.9 per cent of Canfor through Great Pacific Capital Corp., insists on paying $16 a share for the Vancouver-based company and not a penny more, Canfor said in its 82-page management information circular this week.
The lumber producer’s board of directors is urging shareholders to vote next month in favour of the bid valued at $983.8-million, based on the 49.1 per cent of shares not held by Great Pacific on Nov. 18.
Canfor said an independent valuation by Greenhill & Co. Canada Ltd. had determined a preliminary fair market value ranged from $13.72 to $18.87 a share.
Barbara Hislop, an independent Canfor director and a former executive at the forestry company, owns 2,579,405 shares worth $41.27-million, based on the cash bid of $16 a share. She “would vote in favour if Great Pacific’s indicative offer was increased to the current mid-point of Greenhill’s preliminary valuation of $16.29 per common share,” according to the circular.
If the bid were to be increased by 29 cents a share, it would mean an extra $748,027 for her.
But Mr. Pattison, who launched his bid in August, called Canfor chairman Conrad Pinette on Oct. 18 to advise him that Great Pacific would not be raising its offer.
On Oct. 27, “Ms. Hislop indicated that she was not prepared to commit to vote her common shares in favour of the indicative offer at this time,” according to the circular issued on behalf of Canfor’s board.
Ms. Hislop, Mr. Pinette, John Baird and McNeill Singleton are the Canfor independent directors who formed a special committee in August to help scrutinize Great Pacific’s offer.
Letko Brosseau and Associates Inc., a Montreal-based investment management company that controls 4.7 per cent of Canfor, reiterated in early November that it plans to vote against the offer because it undervalues Canfor.
Greenhill ended up determining on Oct. 28 that Canfor’s fair market value ranges from $14.24 to $19.38 a share.
“Although we suspect the shareholder vote in December may be close, particularly as board member and shareholder Barbara Hislop’s intentions remain unknown, we do not believe dissenting shareholders have the votes to block the deal," CIBC World Markets Inc. analyst Hamir Patel said in a research note.
Canfor shares slipped 3 cents to finish at $15.94 on Thursday on the Toronto Stock Exchange.
The transaction will require approval by a simple majority of the votes cast by eligible minority shareholders at a special Canfor meeting on Dec. 18 in Vancouver. If the voting goes in favour of Mr. Pattison’s bid, the deal will close by the end of 2019, subject to a court-approved plan of arrangement.
The 91-year-old billionaire is the chief executive of his conglomerate, Jim Pattison Group. His holdings are diverse, including: car dealerships, billboard advertising, Guinness World Records, Ripley’s Believe It or Not, Great Wolf Lodge, and the Save-On-Foods supermarket chain and other grocery stores.
Mr. Pattison’s bid for full control of Canfor comes during a forestry downturn, with low lumber and pulp prices.
Benchmark two-by-fours made from Western spruce, pine and fir sold this week for US$396 for 1,000 board feet, down 36 per cent compared with a record high of US$622 in June, 2018, according to industry newsletter Madison’s Lumber Reporter.
Canfor repurchased nearly 2.3 million shares at an average of $27.91 a share in the third quarter of 2018. This week’s circular by the company said the stock buyback program came when the forestry sector appeared to have rosy long-term prospects, with expectations that benchmark lumber prices could average US$495 for 1,000 board feet for five years.
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