Cascades has boosted its US retail tissue offering after entering into an agreement to acquire Orchids Paper Products Company.
The move will include the Barnwell, South Carolina, and Pryor, Oklahoma-based operations, as well as certain assets, the supply and other commercial arrangements with Fabrica de Papel San Francisco (“Fabrica”), based in Mexicali, Mexico, and certain of its affiliates.
It is anticipated that the transaction will close in August or September 2019 subject to the satisfaction of customary closing conditions. The company will pay a cash consideration of US$207m, financed by its credit facilities. The acquired assets are expected to generate annual EBITDA of approximately US$45m beginning in 2021.
Orchids Paper’s integrated plants have an estimated parent roll capacity of up to 114,000 tonnes and up to an estimated 114,500 tonnes of converting capacity. The company also has an agreement with Fabrica providing access for up to an additional 20,000 tonnes of converted products for the Western USA market.
The move accelerates the modernisation of Cascades’ US tissue platform as well
as strengthening its geographic and operational reach in the retail tissue segment in the Southern and Western United States. More than US$240m has been invested in the plants’ modern production and converting equipment and strategic partnership over the last five years. This includes the installation of a new paper machine, two new converting lines and the modernisation of two others converting lines at the Pryor site; a new Valmet QRT paper machine installed at the Barnwell site in 2017.
In the coming months, Cascades will invest approximately US$5m to add swing functionality to expand the range of products that can be manufactured from ultra-premium structured tissue to high- quality conventional.
In the coming months, Cascades will maximise the Barnwell and Pryor plants
– which the company said operated at approximately 30% and 70% of their total converting capacity in 2018 – by transferring volumes that are currently outsourced to third parties or produced at the company’s other US plants to these facilities. Cascades President and chief executive Mario Plourde said: “This acquisition is very well aligned with our strategic plan and supports our efforts to position our tissue platform for long-term growth.
“The acquisition of these well-funded assets enables us to do so while simultaneously supporting market consolidation and avoiding the risks inherent in the construction or installation of new equipment.
“We are focused on carrying out strategic investments in our key tissue sector that will modernise our assets, lower our fixed cost base, optimise our geographic footprint, and improve our logistics network and requirements to support the growth
of our customers and Cascades. I have confidence in our future in this sector which has been very beneficial and generated interesting margins for Cascades over the past 40+ years”.