Catalyst Paper Corporation (CPC) has received an expression of intent for its acquisition from an international corporation with headquarters in India.
If accepted, the acquisition would give Kejriwal Group International (KGI) majority control of CPC.
The proposed acquisition involves CPC’s four largest shareholders, including Mudrick Capital Management, Cyrus Capital Partners, Oaktree Capital Management and Stonehill Capital Management. Mudrick, Cyrus, Oaktree and Stonehill currently controls 79 percent of CPC shares.
The expression of intent details a transaction in which KGI acquires majority shares at $6 per share.
On news of the potential acquisition, shares in CPC rose dramatically on the TSX, from 59 cents on Friday, May 20, to a close of $5 on Tuesday, May 24, an increase of almost 750 per cent and their highest level in more than five years.
The acquisition would also involve a new, five-year $260.5 million US term loan and KGI would commit to investments of $25 million in CPC and $35 million in the new term loans.
A CPC press release on Monday, May 23, announced the intended acquisition and stated, “The board of directors has indicated it is encouraged by KGI's proposal, which could provide CPC with a significant amount of capital, which further enhances and accelerates Catalyst's planned growth initiatives.”
CPC owns the Powell River pulp and paper mill, which employs approximately 400 people. According to CPC’s own research, the mill in Powell River invests $41 million in wages and benefits, $10.1 million on local purchases, $3.4 million in property taxes and a broader regional economic impact estimated at $400 million.
CPC was informed of the proposed deal on Monday, May 16, when it learned that schedule 13D filings had been made with the Securities and Exchange Commission in the United States.
Schedule 13Ds may be a precursor to takeovers, company breakups and other events that affect a change in control of the company.
