The Tolleson operations include two sawmills in Perry and Preston, Georgia, with a combined annual lumber capacity of more than 400 million board feet plus a remanufacturing facility in Perry, Georgia. The Tolleson mills were recently ranked as the two lowest cost mills in a survey of US southern pine sawmills. In 2013, Tolleson generated adjusted EBITDA of $37 million on sales of $134 million.
It is estimated that the combination of Interfor and Tolleson will generate more than $5 million in annual synergies through a combination of process optimization, enhancements in logistics and transportation and best-in-class business practices.
Furthermore, the Tolleson mill at Perry has plans underway to increase annualized lumber production by 50 million board feet, beginning in 2015, by upgrading the mill's kilns and increasing the number of operating hours at the facility.
As a result of this transaction, Interfor's annual lumber production capacity will increase by almost 20% to 2.6 billion board feet, placing it in the top five lumber companies in North America. The Company's lumber platform in the US Southeast will total more than 900 million board feet post transaction, representing approximately 35% of the Company's total pro forma capacity.
Following completion, Interfor will work with Ilim Timber to evaluate the potential for various international marketing initiatives including Interfor serving as agent for Ilim Timber's European sales in North America and other potential joint opportunities in China, Japan, the Middle East and elsewhere.
"This transaction represents a significant step for Interfor," said Duncan Davies, Interfor's President and CEO. "The Tolleson mills are a great fit with our operations in the US Southeast and provide a larger footprint on which to build our presence in the region. Even more important, from a financial perspective, the transaction will be immediately accretive to Interfor."
Interfor's consideration for the Tolleson business has been set at $129.9 million in cash and retained liabilities plus 3.68 million Interfor shares.
On a pro forma basis, Ilim Timber will hold 5.5% of Interfor's outstanding shares which will be subject to customary governance provisions including standstill and lockup arrangements.
As part of the transaction, Ilim Timber will have the right to designate one nominee for election to Interfor's Board of Directors. Ilim Timber's Board nominee will be Mr. Paul Herbert, who retired recently as the CEO of Ilim Group, Russia's largest forestry, pulp and paper company, a joint venture between International Paper Company ("IP"), Ilim Timber's principals and other investors.
Mr. Herbert will be appointed to Interfor's Board of Directors on the closing of the transaction and will stand for election at the Company's Annual General Meeting in May.
Rusty Wood, Tolleson's Chief Executive Officer, will remain with Interfor following the transaction in an advisory capacity on matters related to business strategy.
The completion of the transaction is subject to customary conditions and regulatory approvals including the approval of the TSX, and is expected to close in the 1Q 2014.
In 2012 sales of Ilim Timber reached 26.08 billion roubles ($839,39 million) according to Lesnaya Industriya Top-50 rating.
Ilim Timber was founded in 2007 by Boris Zingarevich, chairman of the board. Ilim Timber was a spin-off of the former woodworking assets of Ilim Pulp as part of the joint venture arrangements with International Paper. The company is a leading global manufacturer of milled goods, deep-processed timber products, softwood plywood and hardboard.
