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Columbia Business Monthly

Domtar Corp. Announces Sale of Personal Care Business to American Industrial Partners for $920 Million

Jan 08, 2021 10:41AM ● By David Dykes

By David Dykes

Fort Mill-based Domtar Corp. (NYSE: UFS) (TSX: UFS) said it has entered into a definitive agreement to sell its personal care business to American Industrial Partners (AIP) for $920 million.

Domtar officials said the sale represents the culmination of a process announced Aug. 7, 2020, during which the company undertook a comprehensive strategic review of value-creating alternatives for the business.

With the sale, Domtar is reinforcing its focus on building an industry-leading paper, pulp and packaging company to deliver long-term shareholder value, the officials said.

“This transaction represents a milestone in Domtar’s ongoing portfolio transformation and further advances our strategic initiatives that will position Domtar for a sustainable and successful future,” said John D. Williams, Domtar’s president and chief executive officer. “We conducted a thorough review of strategic alternatives for Personal Care and believe the sale maximizes value to Domtar shareholders by allowing us to strengthen our balance sheet, enhance liquidity and buy back shares.”

Williams added, “The robust interest received reflects the excellent work by our team to improve profitability, gain new customers and enhance the operating structure and cost profile of the business. We are confident that AIP is the right owner to advance the business and look forward to working with them to execute a smooth and successful transition for the customers and employees of Personal Care.”

Williams said the sale is an important component of the company’s strategic plan and “will provide us with additional capital and resources to strengthen and invest in the future of Domtar, leading to a more focused business portfolio.”

The company is making “solid progress” with the conversion of the Kingsport, Tennessee mill, and is “excited about the prospects for building a large, value-added packaging business,” he said.

“We expect construction to officially begin at Kingsport in the second quarter of 2021, setting the stage for the completion of North America’s premier lightweight containerboard facility, with the ability to produce and market approximately 600,000 tons of high-quality recycled linerboard and corrugated medium, by the end of 2022,” Williams said.

Building Industry-Leading Paper, Pulp and Packaging Company

Domtar is executing on a clear plan to create long-term shareholder value by refocusing its portfolio around paper, pulp and packaging, company officials said.

The officials said Domtar has begun to execute its strategic plan to enter the containerboard market with highly competitive assets and a differentiated go-to-market strategy.

The Kingsport conversion provides the company with a strategic entry point to build an up to 2.5 million ton business and become a long-term strategic supplier to the packaging industry, the officials said.

They said Domtar has developed plans to build containerboard into a significant revenue contributor over time, while maintaining secure and stable cash flow through its industry-leading paper and pulp businesses.

Paper has generated attractive returns even in the most challenging environments, and Domtar expects it will remain a reliable and highly cash generative business in the coming years, the officials said.

In pulp, Domtar said it will focus on segments with the highest growth profiles, including the hygiene, tissue and towel markets, and has the opportunity to further enhance its performance through strategic investments.

Use of Proceeds

With the sale, Domtar said it expects to reduce debt by approximately $600 million. Domtar’s strong balance sheet and liquidity will position the company for resiliency and growth, company officials said.

Domtar also said it expects to repurchase approximately $300 million in shares through an accelerated share repurchase program and open market repurchases.

The transaction is subject to receipt of regulatory approvals and other customary closing conditions and is expected to close by the end of the first quarter 2021.

Morgan Stanley & Co. LLC is acting as financial advisor and Debevoise & Plimpton LLP is acting as legal advisor to Domtar. Deutsche Bank Securities Inc. and Barclays are acting as financial advisors and Ropes & Gray LLP and Baker Botts LLP are acting as legal advisors to AIP.

With approximately 8,800 employees serving more than 50 countries around the world, Domtar’s annual sales are approximately $5.2 billion, and its common stock is traded on the New York and Toronto Stock Exchanges. Domtar’s principal executive office is in Fort Mill.

American Industrial Partners is a middle-market private equity firm that has completed over 100 platform and add-on acquisitions and invests in all forms of corporate divestitures, management buyouts, recapitalizations, and going-private transactions of established businesses with revenues of $300 million to $1 billion+.


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