Resolute Forest Products Inc. (NYSE: RFP) (TSX: RFP) today announced the acquisition of Atlas Paper Holdings, Inc., a leading manufacturer of at-home and away-from-home tissue products, including recycled and virgin paper grades.
"This is a step-change acquisition that provides us with an immediate position in the multi-billion-dollar North American consumer tissue market," said Richard Garneau, president and chief executive officer of Resolute Forest Products. "We're following through on our strategy toward the Resolute of the future with an acquisition that capitalizes on our unique ability to capture synergies by integrating forward our U.S. market pulp assets. This acquisition also gives us immediate tissue industry experience as we work toward bringing our Calhoun tissue project online by early 2017."
Based in Florida, Atlas Paper manufactures branded and private label tissue products for the at-home and away-from-home markets. It offers both virgin and recycled products, covering economy, value and premium grades. Atlas Paper operates three tissue machines, with an annual production capacity of approximately 65,000 short tons; 14 converting lines in Hialeah (Miami) and Sanford (Orlando); and a paper recycling facility in Tampa. Atlas Paper employs about 360 people. It will be "business as usual" at Atlas Paper in terms of relationships and commitments to suppliers and customers.
Resolute is uniquely positioned to generate synergies and related benefits with this acquisition, by:
- optimizing Atlas Paper's pulp supply using Resolute's strong U.S. market pulp network;
- capitalizing on excess tissue converting capacity;
- immediately integrating Atlas Paper's tissue expertise for the start-up of the Calhoun tissue project inTennessee; and
- offering a greater range of products – economy, value and premium grades – to existing and future customers.
The purchase price in the transaction, which closed today, was $156 million, including working capital. The company estimates approximately $23 million of annualized earnings before interest expense, income taxes, and depreciation and amortization, or "EBITDA," including synergies, starting in the first quarter of 2016. Resolute expects to maintain Atlas Paper's current structure, and that most employees, including management, will remain with the organization. The financial results attributable to these assets will be reported in a stand-alone "tissue" segment. The company paid for Atlas Paper with available cash, but expects to explore financing opportunities in the coming months, considering its previously-reported significant capital expenditure expectations in connection with the Calhoun tissue project.
BMO Capital Markets acted as the financial advisor and Akerman LLP acted as the legal advisor to Resolute on the transaction.