West Fraser to Acquire U.S. South OSB Mill
West Fraser Timber Co. Ltd. (WFG) announced its agreement to acquire Georgia Pacific's OSB mill in Allendale, South Carolina for approximately $280 million. The mill, which has been idle since 2019, has a capacity of about 760 million square feet. West Fraser plans to invest $70 million to upgrade the facility, with a restart timeline of approximately nine months post-acquisition. The deal is expected to enhance West Fraser's production capabilities and operational flexibility, targeting growing demand in the southeastern U.S. for engineered wood products.
- Acquisition of Allendale mill expected to create additional OSB capacity.
- Investment of $70 million for upgrades could position the mill as a low-cost producer.
- Potential to meet growing customer demand in the southeastern U.S. market.
- The Allendale facility has been idle since late 2019, which may pose operational challenges.
- The total investment may strain financial resources, despite being at a discount to new facility costs.
VANCOUVER, BC, Oct. 26, 2021 /PRNewswire/ - West Fraser Timber Co. Ltd. ("West Fraser" or the "Company") (TSX and NYSE: WFG) announced today that it has entered into an agreement to acquire Georgia Pacific's oriented strand board ("OSB") mill near Allendale, South Carolina for approximately
The Allendale facility, which initially began producing OSB in 2007, has been idle since late 2019 and has an estimated stated capacity of approximately 760 million square feet (3/8-inch basis). The Company intends to invest an estimated
Track Record of Mill Restarts and Strategic Rationale
The Allendale acquisition offers another opportunity for West Fraser to create value by deploying the Company's expertise at successfully reinvesting in and restarting idled OSB mills. Recent West Fraser OSB mill restarts include Chambord, Quebec in March 2021 as well as Huguley, Alabama (2017) and Jefferson, Texas (2013). After modernization, the Allendale facility will enhance West Fraser's OSB portfolio with its attractive location in the U.S. South where fibre is abundant and low-cost. The mill's additional OSB capacity will also give West Fraser the flexibility to better meet customer demand, particularly from large, growing end-markets in the southeastern U.S.
"We look forward to acquiring and upgrading the Allendale mill to make it another component of West Fraser's low-cost production portfolio. Further, the additional production capability will provide greater operational flexibility across our OSB mill portfolio to meet demand growth for our engineered wood products, including for our specialty and value-added products," said West Fraser's President and CEO, Ray Ferris. "We have the leadership, people and know-how to execute on the capital and upgrade plan for this mill and expect to be ready for a restart within nine months of the acquisition closing based on current demand conditions."
West Fraser intends to finance the acquisition with cash on hand. The total investment for the Allendale acquisition is expected to be at a significant discount to the costs of an equivalent greenfield OSB mill while requiring a shorter time to initial production. Based on West Fraser's latest internal analysis, the returns of this mill acquisition and investment are expected to be commensurate with those for other capital projects of similar magnitude.
The Company
West Fraser is a diversified wood products company with more than 60 facilities in Canada, the United States, the United Kingdom, and Europe. From responsibly sourced and sustainably managed forest resources, the Company produces lumber, engineered wood products (OSB, LVL, MDF, plywood, and particleboard), pulp, newsprint, wood chips, other residuals and renewable energy. West Fraser's products are used in home construction, repair and remodelling, industrial applications, papers, tissue, and box materials.
Forward-Looking Statements
This news release contains forward-looking information or forward-looking statements (collectively, "forward-looking statements") within the meaning of applicable securities laws, including the expected closing date of the transaction, the rated capacity of the mill, the estimated capital investment and time to upgrade and modernize the mill, its projected ramp up timeline, cost position and the returns generated. Any such forward-looking statements are based on information currently available to us and are based on assumptions and analyses made by us in light of our experience and our perception of historical trends and current conditions. Readers should also refer to the risk factors set forth in the Company's annual information form and management's discussion and analysis for the year ended December 31, 2020, each dated February 11, 2021, available at SEDAR (www.sedar.com) and EDGAR (www.sec.gov/edgar.shtml). There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will be realized. Actual results may differ, and the difference may be material and adverse to the Company and its shareholders.
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SOURCE West Fraser Timber Co. Ltd.
FAQ
What is the acquisition cost of the Allendale mill by West Fraser (WFG)?
What are the upgrade plans for the Allendale mill after the acquisition?
How will the Allendale mill acquisition impact West Fraser's operations?
When is the expected closing date of the acquisition of the Allendale mill?
What is the production capacity of the Allendale mill?
