Resolute Forest Products will keep its head office in Montreal, assures its CEO

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Resolute Forest Products will keep its head office in Montreal, assures its CEO

Resolute announced on Wednesday that it had accepted a US$2.7 billion acquisition offer from Papier Excellence.

Resolute Forest Products will remain an important player in Quebec, even if it passes into the hands of Groupe Papier Excellence, based in British Columbia, assures the president and chief executive officer of the Montreal company, Rémi G. Lalonde.

The acquirer has made a commitment that Resolute will continue to operate under the same name and Resolute's management team will remain at the head office in Montreal, said Mr. Lalonde in an interview. .

Papier Excellence made a commitment that Montreal would become an important hub for its operations in North America […] I think this is news which recognizes the competence of the people in Montreal, the talent that is available and the role that Quebec can play in the global economy, said the leader.

As a subsidiary, Resolute would continue its operations in the normal course of its activities, adds Mr. Lalonde.

We are not talking about plant closures or job cuts . There may be some synergies here and there over time, but I would point out that today at the head office, out of the 450 employees, we have perhaps around 30 vacant positions. The idea is to maintain current jobs and preserve the operations of our factories.

Resolute announced on Wednesday that it had accepted a US$2.7 billion acquisition offer from Papier Excellence. Resolute will become a subsidiary of the Domtar Group, which also became part of the British Columbia company last year. The transaction is conditional on shareholder support, which will vote in early fall, and regulatory approval.

The commitments of Papier Excellence are important for the Quebec forest industry, reacts Luc LeBel, professor of the Department of wood and forest sciences at Laval University.

“Every time the decision-making centers move away from Quebec, we can have a fear of whether the new decision-makers will remain accessible. »

— Luc LeBel, professor in the Department of Wood and Forest Sciences at Laval University

Mr. LeBel believes that Resolute had a reputation for being a company involved in its community and points out that it invested large sums in research and development. Resolute has been a partner of Université Laval for a long time. It was a business philosophy that will hopefully continue.

Despite Resolute's prominence in Quebec, TD Securities analyst Tim James doesn't think the deal will struggle to get the necessary approvals. We do not believe that industry concentration will pose a regulatory hurdle due to the limited overlap in geographic presence of the two companies.

Being part of a private larger [Papier Excellence is not publicly traded], Resolute will have access to more financial resources to develop its activities, says Mr. Lalonde.

He cites the Résolu newsprint mill in Gatineau as an example. The agreement provides for the completion of a feasibility study for the conversion of the plant into a packaging paper production plant.

It's a project of a few hundred million [dollars]. As a public company that is not in the cardboard sector, it is more difficult to convince public investors to invest 200 to 300 million for a project like this.

The price offered is fair to shareholders, Mr. James believes. The analyst also deems it unlikely that a competing offer will materialize.

The offer of US$20.50 per share represents a premium of 64% relative to the July 5 closing price of the New York Stock Exchange-listed security.

The offer also includes a right to subsequent payment should Resolute receive a refund on filings it made in the softwood lumber litigation between Canada and the United States.

Mr. James estimates the value of this right could equal US$3.98 per share, pre-tax, if the company receives an 80% refund within two years. There is no certainty as to the outcome and when the dispute will be resolved.

In the early afternoon of ;stock gained $10.42, or 64.2%, to $26.65 on the Toronto Stock Exchange.

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