TORONTO – Norbord Inc. (TSX:NBD) and Ainsworth Lumber Corp. (TSX:ANS) announced a deal Monday to combine their businesses to create one of the world’s largest producers of oriented strand board.
Brookfield Asset Management (TSX:BAM.A), a majority shareholder in both companies, will control a roughly 53 per cent stake in the combined firm, assuming the deal receives the required approvals.
Norbord president and chief executive Peter Wijnbergen will retain the top management position, while Ainsworth chief executive Jim Lake will remain as an adviser for six months.
“The transaction will make us the first truly global OSB company,” Wijnbergen told analysts in a conference call Monday.
He said Norbord’s presence in Europe provides it with growth in that region while Ainsworth has become the largest supplier of OSB in Japan and has made inroads in China — two new markets for the wood panels used in residential and industrial construction.
“With a larger mill network, deeper resources and a combined experience, the new company will be even better positioned to pursue the considerable opportunities that exist in Asia,” Wijnbergen said.
However, he also noted the U.S. housing industry appears poised for growth following a prolonged slump caused by a period of overbuilding and a deep recession.
He said the underlying demographics alone support a return to the long-term trend of 1.5 million housing starts on average each year over the next decade.
“Everything we read and everything we know tells us that it’s not a question of ‘if’ things will recover, but how quickly it will get back to this level,” Wijnbergen said.
The deal will involve Toronto-based Norbord buying Vancouver-based Ainsworth Lumber in exchange for shares currently worth about $759 million, based on the Friday stock price of each company.
Under the deal, Ainsworth shareholders will receive 0.1321 of a Norbord share for each of their shares. The offer values each Ainsworth share at about $3.15 — about 5.7 per cent above the market price, based on Friday closing prices for both stocks.
Norbord gained 49 cents to $24.45, Ainsworth jumped 22 cents to $3.20 and Brookfield dipped 41 cents to $56.47 in early trading.
Brookfield and its affiliates control about 55 per cent of Ainsworth stock and 52 per cent of Norbord shares. It has committed to vote in favour of the transaction but the deal also requires approvals from debtholders, minority shareholders and the courts.
The companies estimate the combination will result in $45 million in annual synergies over 18 to 24 months.
Norbord has seven North American mills principally in the U.S. Southeast and one mill in Quebec as well as four in Europe. Ainsworth has four Canadian mills, one in Ontario and the others in Western Canada.
The combined company will maintain an office in Vancouver, where Ainsworth has its headquarters, and a role in the Interex export group of Canadian forest products producers.
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