Forest products company Canfor Corp. says it is selling its BC Chemicals business for $117.3-million (U.S.) as it focuses on its core operations.
The Vancouver-based company said it the unit -- which is located in Prince George, B.C., and produces chemicals used in the pulp bleaching process -- will be purchased by a subsidiary of Chemtrade Logistics Income Fund.
Canfor will also agree to purchase most of the sodium chlorate produced by BC Chemicals for 10 years and pay for the processing of soap skimmings from its own pulpmills.
"This divestiture is part of our plan to re-deploy capital from non-core assets into our core businesses", David Emerson, Canfor CEO, said in a statement.
"The opportunity to partner with Chemtrade is a perfect fit for Canfor. It allows us to monetize a non-core asset, while securing our supply of chlorate over the long-term and mitigating price and volume risks to Canfor."
Chemtrade said the acquisition would have increased its distributable cash by about 11 per cent, or 10 cents, for the six months ended in June. Chemtrade says it expects to increase its annual distribution rate by 4 cents to $1.80 a unit.
"It is expected that the increase will be implemented by increasing each of the four supplemental quarterly distributions by $0.01 per unit," it said.
"The BCC Business has been a critical supplier to Canfor for many years and will continue to be in the future," Mark Davis, CEO of Chemtrade, said in a separate release. "Our 10-year agreements with Canfor link the fees Canfor pays to the major input costs, thereby substantially mitigating price and volume risks for Chemtrade.