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Logs are stacked at an Interfor sawmill, in Grand Forks, B.C., on May 12, 2018.DARRYL DYCK/The Canadian Press

Interfor Corp. will become the only lumber company with operations in all four producing regions of North America with its purchase of Eacom Timber Corp. for $490-million.

The Burnaby, B.C., company says it signed a deal that increases its total lumber production capacity by 25 per cent and expands its business in Eastern Canada.

“This transaction makes Interfor a truly North American lumber producer, with operations in all the key fibre regions on the continent, further diversifying and de-risking our operating platform and enhancing our growth potential and opportunity set,” said CEO Ian Fillinger in a company statement.

Interfor says the acquisition fits with its growth strategy as a lumber producer by expanding its geographically diverse operations by adding scale in a new region. Eastern Canada is a major lumber producing region in the continent, with highly competitive log costs and a desirable spruce-pine-fir (SPF) product mix.

The acquisition enables efficient supply to key eastern markets, such as the Greater Toronto Area (the fourth largest metropolitan area in North America) and throughout the Great Lakes region. It also expands its customers mix by adding home centres.

The addition of Eacom will also provide an opportunity for future growth in Eastern Canada.

Eacom has seven sawmills in Ontario and Quebec with a combined annual spruce-pine-fir lumber production capacity of 985 million board feet and an I-Joist plant with annual production capacity of 70 million linear feet. The company founded in 2008 bought Domtar’s lumber division in 2010.

It also has a remanufacturing plant with annual production capacity of 60 million board feet and rights to access about 3.6 million cubic meters per year of responsibly managed and internationally certified fibre supply.

“This transaction will allow our team to write its next chapter as part of one of North America’s best lumber companies,” stated Eacom CEO Kevin Edgson.

Interfor says the Eacom business will operate under the Interfor banner, but it will maintain all of its key operating leadership and more than 1,300 employees as well as its office in Montreal.

The company says its total annual lumber production capacity will rise to 4.9 billion board feet, of which 46 per cent will be in the U.S. South, 16 per cent in the U.S. Northwest, 20 per cent in Eastern Canada and 18 per cent in British Columbia.

The purchase price includes $120-million of net working capital and Interfor will assume Eacom’s countervailing and anti-dumping duty deposits equal to 55 per cent of total deposits on an after-tax basis. As of Sept. 30, Eacom paid US$150-million in total duties.

Interfor will fund the purchase, which is expected to close in the first half of 2022, with cash on hand and existing credit facilities.

About 40 per cent of Eacom’s external shipments remain in Canada and are not subject to U.S. duties.

Interfor expects to achieve $25-million per year in savings within two years from operations improvements, shared purchasing programs, transportation optimization, enhanced marketing opportunities and expense reductions.

Paul Quinn of RBC Dominion Securities says the acquisition makes a lot of sense for Interfor, which will remain the fourth largest lumber producer in North America, but closer behind Canfor and Weyerhaeuser.

“We think Eastern Canada offers good value given that there is relatively less competition than in the U.S. South,” he wrote in a research note.

“Given our expectation for strong lumber markets going forward, we think Interfor is in a good position to reduce leverage, drive operational improvements, and transition into a return of capital story.”

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