MARYSVILLE – A Canadian forest products company has agreed to buy three lumber mills, including one in Marysville that employs about 40 workers, from bankrupt Crown Pacific Partners LP.
International Forest Products Ltd., also known as Interfor, agreed to pay $57.3 million and provide another $16 million in working capital.
The transaction is subject to approval from the U.S. Bankruptcy Court and other regulatory agencies. A hearing will be held in August, and another party could offer a superior bid for the mills at that time.
“It’s not a done deal yet,” said Interfor spokesman Steve Crombie.
For Interfor, based in Vancouver, B.C., the acquisition provides an opportunity to expand further into the U.S. market.
“We’re buying them because we think they’re strong assets, and they’re complementary to what we have now,” Crombie said.
Crown Pacific has said its mills have been profitable in recent years. The Port Angeles mill was built in 1998 and one in Central Oregon was recently rebuilt. Together, they can produce almost 300 million board feet of lumber a year.
Though parts of the Marysville mill date back to the 1950s, it also has been updated under Crown Pacific’s ownership. It can cut up to 40 million board feet a year of stud lumber out of Douglas fir and other logs.
Crown Pacific of Portland, Ore., filed for Chapter 11 reorganization in June 2003 after trying to restructure its increasing debt. At the end of last year, the company reported liabilities totaling $547 million.
This spring, in a filing with the U.S. Securities and Exchange Commission, Crown Pacific admitted it was unlikely to recover from its heavy debt load. Since then, it has been negotiating the sale of its assets, including the mills and forestland in Washington and Oregon and lumber yard operations in the Southwest.
“There are negotiations on all fronts there,” John Mangan, Crown Pacific’s spokesman, said Monday. He added that no buyer has agreed yet to take over thousands of acres of timber in the North Cascades.
Crombie said Interfor intends to buy timber from areas close to the three mills in order to keep the operations going. At this point, he said, there are no plans to import raw logs from Canada to the U.S. mills.
Interfor is one of western Canada’s largest logging and milling companies, with seven sawmills in British Columbia and four remanufacturing facilities, including one in Sumas, on the Canadian border north of Bellingham. With approximately 3,200 employees, the company had sales exceeding $450 million last year.
This isn’t the first time Interfor has tried to expand with the assets of a failing forest products company. Earlier this year, the company made an unsuccessful bid to purchase several Canadian mills from another bankrupt operator.
The bid for Crown Pacific’s mills makes sense for Interfor, said Paul Quinn, forest products analyst with Salman Partners in Vancouver, B.C.
“It’s a favorable move. One thing they’ve wanted to do is diversify geographically,” he said, adding: “It’s a company with a pretty decent management team that’s aggressive.”
At the same time, Interfor doesn’t want to see its debt mount like Crown Pacific’s. For that reason, Crombie said, the company wants to keep its debt-to-capital ratio under 40 percent. Presently debt-free, the purchase of Crown Pacific’s mills would put that ratio at 20 to 25 percent.
Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.
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