Clearwater Paper Enters into Definitive Agreement to Sell Tissue Business to Sofidel America Corporation for $1.06 Billion

Rhea-AI Summary

Clearwater Paper (NYSE: CLW) has announced a definitive agreement to sell its tissue business to Sofidel America for $1.06 billion. This strategic move aims to transform Clearwater Paper into a premier independent supplier of paperboard to North American converters. The transaction, expected to close in late 2024, represents approximately six times the Adjusted EBITDA of Clearwater Paper's tissue segment for the twelve months ending March 31, 2024.

The company anticipates net proceeds of about $850 million, which it plans to use for deleveraging its balance sheet and investing in growth initiatives for its continuing operations. This deal marks a significant step in Clearwater Paper's strategic transformation and is subject to customary closing conditions, including regulatory approval.

Positive

• Sale of tissue business for $1.06 billion, representing 6x Adjusted EBITDA
• Expected net proceeds of $850 million to deleverage balance sheet and invest in growth
• Strategic transformation into a premier independent paperboard supplier
• Potential for improved financial flexibility and focus on core paperboard business

Negative

• Divestiture of a major business segment, potentially impacting overall revenue
• Execution risks associated with business transformation and integration of proceeds
• Potential loss of diversification benefits from operating in multiple paper product segments

Insights

Financial Analyst

Clearwater Paper's sale of its tissue business to Sofidel America Corporation for $1.06 billion marks a significant strategic shift for the company. The primary financial implication of this deal is the substantial reduction in net debt, estimated to be around $850 million. This is a important move to strengthen the company’s balance sheet, enhancing its financial flexibility for future growth initiatives. By divesting the tissue segment, Clearwater Paper can now focus on becoming a leading independent supplier of paperboard in North America. This concentration on a single business line could translate into increased operational efficiency and potentially higher margins, which is good news for investors. However, investors should closely monitor how well the company re-invests these proceeds and whether the expected growth in the paperboard segment materializes.

Market Research Analyst

This transaction underscores a larger industry trend of companies consolidating and specializing in particular segments to maximize growth and efficiency. Clearwater Paper’s decision to exit the tissue business aligns with a strategic focus on higher-margin paperboard products. For investors, this move could mean more stable and predictable revenue streams, especially if the paperboard market continues to grow. However, the transition period could involve some risks, such as potential integration issues or slower-than-expected growth in the paperboard sector. Furthermore, Sofidel’s acquisition indicates their aggressive expansion in the U.S. market, suggesting increased competition in the tissue segment. Retail investors should be aware of these dynamics and consider the potential for both short-term volatility and long-term gains.

Legal Expert

The completion of this transaction is contingent on regulatory approval, specifically the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. This is a standard procedure for large acquisitions to ensure that the deal does not create unfair market dominance or reduce competition. While such approvals are generally granted, there is always a possibility of delays or even rejection. Investors should be aware of this regulatory risk, although it appears minimal given the nature of the industries involved. Additionally, the involvement of reputable advisors like Goldman Sachs & Co. LLC and Pillsbury Winthrop Shaw Pittman LLP adds a layer of credibility and expertise to the transaction, which bodes well for its successful completion.

Advances Transformation into a Premier Independent Supplier of Paperboard to North American Converters

Transaction to Accelerate Ongoing Efforts to De-Lever the Balance Sheet by Meaningfully Reducing Net Debt

SPOKANE, Wash.--(BUSINESS WIRE)-- Clearwater Paper Corporation (NYSE: CLW) (“Clearwater Paper” or the “Company”), a premier supplier of quality consumer tissue and bleached paperboard, today announced that it has entered into a definitive agreement to sell its tissue business to Sofidel America Corporation, a subsidiary of Sofidel S.p.A. (“Sofidel”), a leading manufacturer of paper for hygienic and domestic use, for $1.06 billion, subject to adjustments for debt, cash, transaction expenses and net working capital. The transaction represents the next step in the Company’s transformation to become a premier independent supplier of paperboard to North American converters and the conclusion of its previously announced review of strategic options for the tissue business.

“We are pleased to have reached this agreement with Sofidel, which we believe positions Clearwater Paper for its next chapter of growth and value creation,” said Arsen Kitch, President and Chief Executive Officer. “Clearwater Paper is transforming into a premier paper supplier in North America. Upon completion of this transaction, we intend to deleverage our balance sheet while scaling and diversifying our paperboard business to meet the needs of our customers. We look forward to delivering innovative and sustainable products to our converter customers while generating strong returns for our shareholders.”

Mr. Kitch continued, “Our tissue business has delivered excellent financial and operational performance, supported by outstanding service. We believe this business needs scale and investment to drive growth over the longer term, and we are excited to watch its continued progress as part of Sofidel. We appreciate the dedication of our talented team members across the organization, who have been instrumental to the successful execution of our strategy.”

“The acquisition of Clearwater Paper’s tissue business is another important milestone on our path to meet the growing demand for our products in the United States,” said Luigi Lazzareschi, Chief Executive Officer of Sofidel. “We look forward to welcoming all the new employees into our family and integrating the tissue business into our network to strengthen our growth by achieving scale and expanding our ability to deliver sustainable, energy efficient products to customers.”

Transaction Details

The $1.06 billion price represents a multiple of approximately six times the Adjusted EBITDA of Clearwater Paper’s tissue segment during the twelve months ending March 31, 2024. The Company expects net proceeds from the transaction of approximately $850 million, which it intends to use to meaningfully delever its balance sheet and invest in growth initiatives for its continuing operations.

The transaction is expected to close in the latter part of 2024, subject to customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Goldman Sachs & Co. LLC is serving as financial advisor to Clearwater Paper, and Pillsbury Winthrop Shaw Pittman LLP is serving as legal advisor.

Availability and Timing of Second Quarter 2024 Earnings Results

In a separate release issued today, the Company announced that it will release its second quarter 2024 results on Tuesday, August 6, 2024. Mr. Kitch and Chief Financial Officer Sherri Baker will discuss the results during a conference call that day at 2 p.m. Pacific Time. Additional information on this event can be accessed at Clearwater Paper’s website: http://ir.clearwaterpaper.com.

ABOUT CLEARWATER PAPER

Clearwater Paper is a premier supplier of private brand tissue to major retailers, including grocery, club, mass merchants, and discount stores. In addition, the company produces paperboard used by quality-conscious printers and packaging converters, and offers services that include custom sheeting, slitting, and cutting. Clearwater Paper's employees build shareholder value by developing strong relationships through quality and service. For more information on Clearwater Paper, please visit our website at www.clearwaterpaper.com.

FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including statements regarding the expected timing and structure of the proposed transaction; the ability of the parties to complete the proposed transaction considering the various closing conditions; the company’s paperboard strategy, including its plans to further scale and increase capacity utilization; the company’s plans for the proceeds from the transaction, including its plan to meaningfully de-lever its balance sheet; and the company’s expectation that paperboard represents the best opportunity for steady and sustainable value creation. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words "may," "will," "should," "potential," "intend," "expect,", "endeavor," "seek," "anticipate," "estimate," "overestimate," "underestimate," "believe," "could," "project," "predict," "continue," "target" or other similar words or expressions. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, (1) that one or more closing conditions to the transaction, including certain regulatory approvals, may not be satisfied or waived, on a timely basis or otherwise; (2) the risk that the proposed transaction may not be completed in the time frame expected by the parties, or at all; (3) unexpected costs, charges or expenses resulting from the proposed transaction; (4) the risk that stockholder litigation in connection with the proposed transaction or other settlements or investigations may affect the timing or occurrence of the contemplated transaction or result in significant costs of defense, indemnification and liability; and (5) other risk factors as detailed from time to time in the company’s reports filed with the SEC, including its Annual Report on Form 10-K, periodic quarterly reports on Form 10-Q, periodic current reports on Form 8-K and other documents filed with the SEC. The foregoing list of important factors is not exclusive. Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date on which they are made and the company does not undertake any obligation to update such statements, except as may be required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240719333892/en/

Investor contact:

Sloan Bohlen

Solebury Strategic Communications

509.344.5906

investorinfo@clearwaterpaper.com

Media contact:

Matt Van Vleet

Clearwater Paper Corporation

509.344.7117

matt.vanvleet@clearwaterpaper.com

Source: Clearwater Paper Corporation

FAQ

What is the value of Clearwater Paper's tissue business sale to Sofidel America ?

Clearwater Paper (CLW) has agreed to sell its tissue business to Sofidel America for $1.06 billion, subject to certain adjustments.

When is the Clearwater Paper (CLW) tissue business sale expected to close?

The transaction is expected to close in the latter part of 2024, subject to customary closing conditions and regulatory approval.

How does Clearwater Paper (CLW) plan to use the proceeds from the tissue business sale?

Clearwater Paper expects net proceeds of about $850 million, which it intends to use to meaningfully deleverage its balance sheet and invest in growth initiatives for its continuing operations.

What is Clearwater Paper's (CLW) strategic focus after selling its tissue business?

After the sale, Clearwater Paper aims to transform into a premier independent supplier of paperboard to North American converters, focusing on scaling and diversifying its paperboard business.