The Canadian Competition Bureau has cleared the way for a $3.7 billion acquisition that will make Richmond-headquartered Paper Excellence Group one of the largest forestry companies in North America.
The Competition Bureau on December 29 approved the acquisition of Resolute Forest Products (TSX,NYSE:RFP) by Domtar for $3.7 billion. Domtar is now a division of Paper Excellence Group, which acquired Domtar in 2021 for $4 billion.
But a condition of the acquisition is that Domtar sells a pulp mill in Dryden, Ontario and a pulp and paper mill in Thunder Bay to two independent buyers, after the sale closes.
The acquisition of Resolute Forest Products would make Paper Excellence one of North America’s largest forestry companies, with more than two dozen pulp, paper and packaging mills and 17 lumber mills in sa国际传媒 and the U.S.
A Canadian competition tribunal raised concerns that the acquisition would create too much concentration in northern bleached softwood kraft (NBSK) production in Eastern and Central sa国际传媒. It also raised concerns that it could create a monopsony – a kind of monopoly in which one or a few players control the price of inputs, like fibre supply.
“The bureau determined that Domtar and Resolute account for a significant portion of the supply of NBSK in Eastern and Central sa国际传媒,” the Competition Bureau says in a December 29 press release.
“The proposed transaction would result in market shares well above the 35% threshold established in the bureau’s Merger Enforcement Guidelines. The bureau established that substantial obstacles exist to new entry in the market, or expansion of an existing mill.
“As well, the bureau determined that the proposed transaction would likely provide Domtar with monopsony power in northwestern Ontario and enable Domtar to pay lower than competitive prices to suppliers of wood fibre.”
The Competition Bureau said the sale of the two Domtar mills would address its concerns.
The sale is expected to close in the first half of this year. While Paper Excellence will grow considerably in size in North America, its operations in sa国际传媒 have been shrinking.
Paper Excellence at one point owned seven pulp and paper mills in sa国际传媒, but is now down to four.
Since 2020, it has permanently shut down mills in Mackenzie and Powell River. The four remaining Paper Excellence mills in sa国际传媒 are in Crofton, Port Alberni, Howe Sound and Skookumchuk. While the pulp mill is still operating in Crofton, Paper Excellence has indefinitely curtailed its paper operations there.
Pulp and paper mills in sa国际传媒 are vulnerable to sawmill closures, which provide much of their inputs in the form of sawmill waste. Sawmills continue to shut down in sa国际传媒 due to high operating costs and a dwindling timber supply.
Joe Nemeth, project manager for the BC Pulp and Paper Coalition, warns sa国际传媒’s pulp and paper mills are in a precarious position, due to the shrinking supply of fibre.
“Paper Excellence has Powell River mill down permanently, and paper mill (in Crofton) down indefinitely, which is representative of sa国际传媒,” Nemeth said. “They’ve got about 25% of their capacity down, and that’s representative of sa国际传媒”
