West Fraser buys 'new' Texas SYP plant
West Fraser Timber Co. Ltd. has entered into an agreement to acquire the Angelina Forest Products lumber mill located in Lufkin, Texas for approximately $300 million.
The move is subject to certain post-closing adjustments with the transaction anticipated to close following successful completion of U.S. regulatory reviews and satisfaction of customary conditions.
The state-of-the-art facility officially opened in late 2019 with McCoy’s Building Supply being the recipient of one of the plant’s original deliveries.
The facility produces southern yellow pine lumber (SYP) products and began construction in 2018 and is expected to progress toward full production capacity of approximately 305 million board feet over the next three to four years, West Fraser said.
The transaction includes approximately $4 million of target working capital and approximately $24 million of supplemental tax attributes that are expected to result in a direct cash flow benefit to West Fraser.
Vancouver, British Columbia-based West Fraser said the acquisition is an important step in the company’s continued expansion of U.S. lumber operations. The new, highly efficient facility is expected to be a top quartile mill that will integrate with and support our existing East Texas lumber and OSB business.
Anticipated to be among the lowest-cost operations in the Company’s lumber mill portfolio, the Lufkin mill is strategically located near low-cost and abundant fibre as well as large and growing end-markets and its additional lumber production will allow West Fraser to better serve the company’s growing customer base in Texas and the southern U.S.
Upon completion of this transaction, West Fraser will have a combined Canadian and U.S. lumber production capacity of approximately 7 billion board feet, with U.S. capacity of SYP lumber representing approximately 50% of the Company’s capacity.
According to West Fraser CEO and President Ray Ferris, this move will allow the forest products company to enhance its U.S. platform of lumber mills and meet growing demand in Texas and the southern U.S. market.
“With this acquisition, we will be able to quickly capitalize on a fully-invested and high-quality manufacturing facility,” Ferris said. “This includes a trained labor force and the local community and logistics infrastructure to support the mill’s supply chain, distribution and outlet for residuals. Further, we are able to immediately reap the cash flow benefits of our investment while significantly reducing the associated risks of greenfield construction, execution and start-up.”
West Fraser intends to finance the acquisition with cash on hand. Annual synergies of approximately $13 million are anticipated to be achieved within two years with minimal capital requirements. These synergies are expected to be realized through continued capacity utilization improvement, implementation of best practices and the coordinated transportation, logistics and procurement benefits derived from West Fraser’s distribution scale and existing production facilities in the region.
West Fraser operates more than 60 facilities in Canada, the United States, the United Kingdom, and Europe. The company produces lumber, engineered wood products (OSB, LVL, MDF, plywood, and particleboard), pulp, newsprint, wood chips, other residuals, and renewable energy.
