West Fraser Timber Co. Ltd. announced an agreement to sell its unbleached softwood kraft pulp mill in Hinton, Alberta to Mondi Group plc, a global company in sustainable packaging and paper.
The transaction establishes a long-term partnership between the two companies in the region. Pursuant to the transaction, West Fraser will continue to supply fibre to the Hinton mill under long-term contract, via residuals from West Fraser’s Alberta sawmills. Mondi’s intention, subject to pre-engineering and permitting, is to invest Euro 400 million in the expansion of the Hinton mill, primarily for a new 200,000 tonne per annum kraft paper machine, anticipated to be operational from the second half of 2027.
“This transaction creates a sustainable long-term future for the pulp mill, while maintaining the integrated fiber supply chain in place with West Fraser’s operations in the region,” said Ray Ferris, West Fraser’s President & CEO. “The relationship with Mondi puts the Hinton pulp mill in the hands of a global industry leader, with the vision and experience to maximize opportunities for local employees and the community. We look forward to a mutually beneficial long-term relationship with Mondi and our other stakeholders in Alberta.”
Mondi is an integrated packaging and paper company employing 22,000 people across 100 production sites in more than 30 countries. Mondi has a premium listing on the London Stock Exchange and a secondary listing on the Johannesburg Stock Exchange.
Commenting on the acquisition, Andrew King, Mondi Group CEO, said: “We are delighted to be making this investment in Canada and look forward to working with our Hinton colleagues, West Fraser as a long-term partner, and other local stakeholders towards improving the mill’s environmental footprint and securing its sustainable future.”
West Fraser expects to record a significant impairment loss in connection with the disposal of the Hinton pulp mill given the nominal proceeds. The estimated carrying value of the assets and liabilities being disposed of were $115 million and $111 million as of December 31, 2022 and March 31, 2023 respectively.
The transaction is anticipated to close following successful completion of customary regulatory reviews and satisfaction of customary conditions. West Fraser will provide a further update during its second-quarter results conference call.
TD Securities Inc. is acting as exclusive financial advisor and McMillan LLP is acting as legal advisor to West Fraser.