Interfor to Acquire Chaleur Forest Products in New Brunswick, Canada

Interfor Corporation (“Interfor” or the “Company”) announced that it has reached an agreement with an affiliate of the Kilmer Group (“Kilmer”) to acquire 100% of the equity interests in the entities comprising Chaleur Forest Products (“Chaleur”).

Chaleur owns two modern and well-capitalized sawmill operations located in Belledune and Bathurst, New Brunswick, with a combined annual lumber production capacity of 350 million board feet. Chaleur also operates a woodlands management division based out of Miramichi that manages approximately 30% of the total Crown forest in New Brunswick. This division provides a secure source of fibre supply for the sawmill operations as well as a stable, long-term stream of cash flow from third-party log sales, licence management fees and silviculture activities.

The purchase price is C$325 million, on a cash and debt free basis, which includes approximately C$31 million of net working capital. In addition, Interfor will assume Chaleur’s countervailing (“CV”) and anti-dumping (“AD”) duty deposits at closing, for consideration equal to 55% of the total deposits on an after-tax basis. As of August 31, 2022, Chaleur had paid cumulative CV and AD duties of approximately US$82 million.

“This acquisition is consistent with Interfor’s growth-focused strategy as a pure-play lumber producer and builds upon our recent expansion into Eastern Canada with further geographic diversity,” said Ian Fillinger, President & Chief Executive Officer.   “New Brunswick has a secure, high quality and competitive log supply, a supportive investment environment and proximity to key eastern markets. These are well-managed and efficient mills with a desirable SPF product mix, which fit extraordinarily well within our existing portfolio. Chaleur’s strong management team further bolsters our core lumber strength and we look forward to welcoming the team into our company.”

On a proforma basis, Interfor’s total annual lumber production capacity will increase to 5.1 billion board feet, of which 44% will be in the US South, 19% in Eastern Canada, 15% in the US Northwest, 15% in British Columbia and 7% in Atlantic Canada.

The acquisition will be immediately accretive to Interfor’s earnings and is expected to provide attractive returns in both the near-term and over the long-term. Interfor estimates Chaleur’s mid-cycle EBITDA to be approximately C$50 million per year pre-synergies, taking into account mid-cycle lumber prices and current run-rate performance. Interfor expects to achieve synergies of C$5 million per year from combined sales and marketing opportunities, shared purchasing programs and general and administrative expense reductions. These synergies are expected to be fully achieved within twelve months of closing, with no capital requirements.

Interfor intends to finance the acquisition with a combination of cash on hand and its existing credit facilities. Following the completion of this acquisition Interfor will continue to have significant financial flexibility to execute its strategic capital investment plans and consider additional value-creating capital deployment options. As of August 31, 2022 Interfor had net debt of approximately C$48 million and a Net Debt to Invested Capital ratio of 2%. Proforma the Chaleur acquisition and proforma Interfor’s C$100 million Substantial Issuer Bid completed on September 12, 2022, Interfor’s Net Debt to Invested Capital ratio as of August 31, 2022 would remain below 20%¹. Similarly, proforma liquidity as of August 31, 2022 would be approximately C$322 million, before consideration of significant additional borrowing capacity available under existing credit limits and continued near-term operating cash flows.

The completion of the acquisition is subject to Canadian and U.S. regulatory reviews and customary conditions for a transaction of this kind and is expected to close in the fourth quarter of 2022.

Chaleur’s operations were not damaged or impacted by Hurricane Fiona in any way.

This release, including a French language version of this release, has been posted on www.interfor.com in the Investors section under News.

About Interfor

Interfor is a growth-oriented forest products company with operations in Canada and the United States. The Company has annual lumber production capacity of approximately 4.7 billion board feet and offers a diverse line of lumber products to customers around the world. For more information about Interfor, visit our website at www.interfor.com.

Contact:

Svetlana Kayumova – Senior Manager, Corporate Affairs & Communications – svetlana.kayumova@interfor.com – (604) 422-7329

Source: Interfor Corporation