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Resolute to sell Catawba pulp mill
Resolute Forest Products announced that it has entered into a definitive asset purchase agreement with New-Indy Containerboard, LLC ("New-Indy") for the sale of its Catawba, South Carolina, paper and pulp mill, for a total purchase price of about $300 million, consisting of $260 million in cash, subject to customary closing adjustments, and the assumption of approximately $40 million of balance sheet liabilities, largely net pension benefit obligations.
Catawba's operation includes a kraft mill and a pulp dryer to produce market pulp, a thermomechanical pulp mill as well as a lightweight coated paper machine. The facility currently employs 460 people.
Under the terms of the asset purchase agreement, New-Indy will offer employment to Catawba employees effective upon closing of the transaction, which is expected at or around year-end. The sale is subject to certain closing conditions.
"This transaction will allow us to realize significant value for an asset whose greatest earnings potential lies with the investment in and diversification of the mill's operations, as proposed by New-Indy," stated Yves Laflamme, president and chief executive officer of Resolute. "We are pleased that the mill will continue to operate and benefit the local community, both economically and socially."
Without the Catawba operation, we estimate that Resolute's operating income, excluding depreciation and amortization, for the 12 months ended June 30, 2018, would have been approximately $25 million, or 5%, lower. Including depreciation and amortization of $15 million, the operating income would have been about $10 million lower. These figures are not indicative of expected results for periods subsequent to June 30, 2018, particularly in light of recent price increases for market pulp and coated paper products.
"We expect to use the proceeds from this asset sale to further reduce our net debt and improve shareholder value," added Laflamme. "We will continue to explore high-return strategic opportunities to grow our core businesses in line with our transformation strategy. Over the coming days, we will communicate with our customers to discuss the impact of the transaction and the transition of supply for their orders of lightweight coated paper and market pulp."
New-Indy is an independent manufacturer and supplier of recycled containerboard to the corrugated box industry. The company was formed in 2012 as a joint venture by The Kraft Group, LLC and Schwarz Partners, LP. Headquartered in Ontario (California), New-Indy operates manufacturing facilities in Ontario and Oxnard (California), Peoria (Illinois) and Hartford City (Indiana), along with a recycling facility in Kendalville (Indiana).