Catalyst and Paper Excellence reach 'very positive' agreement

New owner intends to maintain local operations for foreseeable future, says Paper Excellence Canada CEO

A transaction between Paper Excellence Canada Holdings Corporation (PEC) and Catalyst Paper Corporation announced on Tuesday, October 9, is expected to close by the end of the fourth quarter 2018 or early first quarter 2019, when PEC will acquire all of the issued and outstanding shares of the company. Subject to regulatory review and final approvals, the deal includes Catalyst mills in Powell River, Crofton and Port Alberni.

From all accounts, it is good news for Catalyst, PEC, Powell River and the workers who are employed at the mill.

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“We think it's positive because we're actually going to be owned by a company that is in the pulp and paper business rather than hedge-fund owners and bankers back in New York,” said Unifor local 76 president Mike Rumley, a 40-year mill veteran. “We didn't know if they were going to keep us running or if they were going to shut us down or what their interest was.”

Catalyst is currently owned by Oaktree Capital Management, Mudrick Capital Management, LP, and Cyrus Capital Partners, LP.

“I believe we have a better opportunity to actually maybe invest some money and work on the place and be here for the long haul,” added Rumley.

PEC is the largest pulp producer in Canada with three facilities in BC at Howe Sound, Skookumchuck and Mackenzie, as well as Meadow Lake, Saskatchewan, and Nova Scotia, and two mills in France.

From the perspective of PEC president and chief executive officer Brian Baarda, Tuesday was a good day, representing a culmination of interest in Catalyst that goes back a number of years.

“It's not every day that you get a chance to announce that you've entered into an agreement to acquire another business, particularly of Catalyst Paper's calibre,” said Baarda, who was vice president of Catalyst in Powell River from 2005 to 2008. Baarda has a unique knowledge of Catalyst through his 10-year history with the company. In addition to being mill manager here, he was the company’s chief financial officer and vice president of finance, and vice president of operations.  

“We clearly recognize the importance of a mill like the one that you have in Powell River; how important it is to both the jobs of the employees there as well as to the community, given the size it has within that community,” said Baarda. “We intend to maintain the operations as they stand today for the foreseeable future. We don't anticipate making any changes.”

Catalyst has had an uncertain year. At times the sustainability of the business was questioned and the challenges it faced once had City of Powell River mayor Dave Formosa calling the situation a crisis.

Early in the year, United States Department of Commerce slapped punishing anti-dumping duties on Catalyst products, particularly those made in Powell River. Those tariffs have since been lifted. The company has also faced fibre shortages and energy cost increases.

But overall, Catalyst president and chief executive officer Ned Dwyer said the company has done better than its done in a long time, and all three mills are performing well.

“We've been working a long time to find a solution for Powell River; we've enjoyed some really good improvements and performance,” said Dwyer. “The mill team has really come together and improved the operating results, that's helped a lot in getting a buyer interested in the facility. Having a strategic buyer buy the Powell River mill is a great solution for this mill.”

Dwyer was in Powell River on Tuesday, October 9, to meet with employees.

“I told them about the transaction, that we made an agreement to sell the company as a whole and we think that the agreement is a very positive agreement,” said Dwyer. “It takes care of the employees, it takes care of the retirees. It provides some sustainability for the communities we operate in and I thanked them for the great work that they've done.”

He said he also wanted to give credit to Formosa for being a great supporter of the Powell River mill.

“When we've come to him with serious concerns about our costs and about our taxes, he's stood up for those things and he's been the most keenly focused politician that I've ever dealt with in my career; keenly focused on the sustainability of the mill, understanding how important the mill is to this community and being a strong advocate,” said Dwyer.

Formosa said he became involved in talks with Catalyst when a partnership he formed between Canadian and Chinese investors offered to buy the company. Their interest turned solely to Powell River because the mill was in danger.

In the end, Formosa said there were two companies competing for Catalyst and he thinks Paper Excellence was successful because their offer was a share purchase, not a sale of assets.

“Our group was instrumental in seeing that did not happen because it was inevitable that the Powell River mill would not survive that scenario, in my view,” he said.

Formosa said he has recently held meetings with Baarda on two occasions.

“I've been given the comfort by Mr. Baarda that they intend to run our machines,” Formosa said. “I believe they're sincere, and they want to invest in new products. We'll do everything we can to support Paper Excellence and Brian Baarda moving forward.”

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