Interfor Corp. is forging ahead with a strategy fuelled by record high prices to grow its lumber production in the United States as the U.S. moves to increase softwood lumber duties on Canadian imports to protect its domestic producers.
The Burnaby, B.C.-headquartered company says it will buy four sawmills for US$375-million, including working capital, in Mississippi, Alabama, Louisiana and Oregon from Georgia-Pacific Wood Products LLC and GP Wood Products LLC.
In March, it closed a deal to buy a sawmill in South Carolina from WestRock Co. for US$59-million.
The acquisitions have been paid for with cash on hand.
The Georgia-Pacific deal is expected to boost Interfor’s annual lumber production capacity by 720 million board feet to 3.9 billion board feet, of which 77 per cent will be based in the U.S. and not subject to softwood lumber duties.
Last week, the U.S. Commerce Department recommended higher duties which, if finalized later this year, would more than double the “all others” countervailing and anti-dumping rate to 18.32 per cent from 8.99 per cent.
In a research report, CIBC analyst Hamir Patel points out that the acquisition is being made near the top of the market, but that the price is reasonable.
“This acquisition enhances Interfor’s growth-focused strategy as a pure-play lumber producer, and provides significant economies of scale given the complementary geographic fit with our existing U.S. operations,” said CEO Ian Fillinger in a new release.
Interfor says it will still have “significant financial flexibility” to consider other growth options following the latest acquisitions.
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