News within the industry of pulp and paper, Jul, 23 2019
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Cascades to acquire Orchids Paper Products assets

Photo: Cascades
Photo: Cascades
Published by
Simon Matthis - 02 Jul 2019

Cascades announces that it has entered into a definitive agreement for the acquisition of substantially all of the assets of Orchids Paper Products Company following the approval thereof by the United States Bankruptcy Court for the District of Delaware (subject to completion of definitive documentation).

Cascades will pay a cash consideration of US$207 million, financed by the Company's credit facilities. The assets to be acquired include the Barnwell , South Carolina and Pryor, Oklahoma operations, as well as certain assets, the supply and other commercial arrangements with Fabrica de Papel San Francisco , S.A. de C.V. ("Fabrica"), based in Mexicali, Mexico , and certain of its affiliates. Cascades anticipates the transaction will close in August or September 2019 , subject to the satisfaction of customary closing conditions.

 

The acquired assets are expected to generate annual EBITDA of approximately US$45 million beginning in 2021, implying an acquisition multiple of approximately 5x, driven by the maximization of capacity utilisation of the acquired facilities, Company asset rationalization, and important reductions of corporate, sub-contracting and logistics costs.

 

Orchids Paper's integrated plants have an estimated parent roll capacity of up to 114,000 tons and up to an estimated 114,500 tons of converting capacity. Additionally, Orchids Paper has an agreement with Fabrica providing access for up to an additional 20,000 tons of converted products for the Western U.S. market. More than US$240 million has been invested in the plants' modern production and converting equipment and strategic partnership over the last five years. This includes, at the Pryor site, the installation of a new paper machine, two new converting lines and the modernization of two others converting lines. At the Barnwell site, a new Valmet QRT paper machine was installed in 2017. In the coming months, Cascades will invest approximately US$5 million to add swing functionality to expand the range of products that can be manufactured from ultra-premium structured tissue to high-quality conventional, thereby maximizing its full potential.

 

The acquisition accelerates the modernization of Cascades' U.S. tissue platform while strengthening the geographic and operational positioning of the Company's retail tissue segment in the Southern and Western United States . The acquired plants, equipped with 100" paper machines, are better aligned with Cascades' long-term model for its converting equipment, which will reduce the rejection rates during conversion operations and improve overall efficiency and productivity.