TORONTO and VANCOUVER—Norbord Inc. and Ainsworth Lumber Co. Ltd. have proposed a merger between the too companies that would create one of the largest oriented strand board (OSB) producers in the world.
Under the terms of the $760-million all-share deal, Toronto-based Norbord has agreed to acquire all outstanding common shares of Ainsworth, with Ainsworth shareholders receiving 0.1321 shares in return.
The transaction value represents a 15 per cent premium to Ainsworth’s 20-day average price.
“This transaction unites two complementary businesses behind a common vision of enhanced service to our customers and growth in North America, Europe and Asia,” Norbord president and CEO Peter Wijnbergen said in a statement announcing the deal.
Toronto-based Brookfield Asset Management Inc. will own 53 per cent of the combined company.
Norbord said the combined company, on a pro forma basis, generated US$1.63 billion in sales and US$143 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the 12 months ended Sept. 27, 2014.
The deal will create one of the largest and lowest-cost OSB producers globally, accordign to Norbord, with a portfolio of manufacturing assets that produces a range of products for residential, industrial and specialty applications.
Norbord operates 15 plants, 11 of which produce OSB, while Ainsworth owns four production facilities.
“Norbord and Ainsworth are each low-cost producers in their respective regions, and with our complementary operations and a more diverse range of specialty products, we will be better able to serve our customers across the globe,” Wijnbergen said. “Ainsworth has excellent mills, a proven track record of innovation in value-added product development, and we look forward to working together.”
The two companies have minimal overlap, according to Norbord, as it operates seven North American mills, principally in the southeastern United States with one mill in Quebec, along with four mills in Europe, while Ainsworth operates mills in Western Canada and Ontario.
Total OSB capacity will be approximately 7.7 billion sq.ft., Norbord said.
The company estimates the deal will create synergies of US$45 million annually.
“The combination of the two companies will mean tremendous opportunities for our people and our customers,” Ainsworth president and CEO Jim Lake said.
“By joining with Norbord we will be able to leverage its commitment to low-cost operational excellence to expand and improve our existing range of products and enhance our customer relationships.
The combined company will operate under the Norbord name.
The transaction is expected to close in the first quarter of 2015 subject to closing conditions.