NEW YORK (AP) — AbitibiBowater Inc. has agreed to sell a newsprint mill to Catalyst Paper Corp. for $161 million, the paper and wood products company said Monday.
The Snowflake, Ariz., facility has a production capacity of about 375,000 metric tons (413,367 tons) of newsprint per year. The sale price excludes about $19 million worth of working capital that AbitibiBowater has retained.
The Justice Department required the combined company to sell the mill as part of its consolidation last year. AbitibiBowater is the result of U.S. newsprint maker Bowater Inc.'s all-stock acquisition of Canadian forest products company Abitibi-Consolidated LLC.
Montreal-based AbitibiBowater has also agreed to supply Catalyst with recycled fiber for the mill over three years. AbitibiBowater will deliver about 40 percent of the mill's supply for the first year, with the amount decreasing over the life of the contract. Catalyst, which is based in Richmond, British Columbia, plans to acquire remaining supplies from other providers in western North America.
The Snowflake mill will ''improve (Catalyst's) cost-competitiveness, strengthen our presence on the west coast of North America and provide us with a more freight logical way to serve existing as well as new customers,'' Catalyst Chief Executive Richard Garneau said in a statement.
He added that its location will allow for a ''natural hedge'' against currency fluctuations and is timely because of tight supplies of virgin fiber.
The companies expect the deal to close in the second quarter. Catalyst is funding it through its revolving credit facilities and a proposed stock offering of 125 million Canadian dollars ($125 million). AbitibiBowater plans to use proceeds to repay debt and for general purposes.
Following its required divestiture, AbitibiBowater will own or operate 28 pulp and paper facilities and 35 wood products facilities in the U.S., Canada, the U.K. and South Korea. Catalyst, which makes mechanical printing papers and pulp, operates five mills on or near the southern coast of British Columbia.
