Interfor Corp T.IFP

Alternate Symbol(s): IFSPF

Forest Products Lumber & Wood Production

Interfor Corporation is a Canada-based forest products company. The Company and its subsidiaries produce wood products in Canada and the United States for sale to markets around the world. It operates through the solid wood products segment. The Company’s product categories include Dimension Lumber, Specialty Lumber and Engineered Wood Products. Its products include Spruce-Pine-Fir, Douglas Fir-Larch, Hem-Fir, Southern Yellow Pine, Western Red Cedar, Douglas Fir-Larch, and P3-Joist. Its sawmills provide a diverse range of sustainable products to supply North American markets with a complete offering of framing materials. Its Western Red Cedar products include Elite Decking, Elite Fascia & Boards, Elite V-Joint Paneling, Elite Fineline Paneling, Elite Channel/Lap Siding, Elite Bevel Siding and Elite Shadow Gap Siding. It has an annual lumber production capacity of approximately 5.0 billion board feet and offers a diverse line of lumber products to customers around the world.

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Interfor Corp

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Post by retiredcfon May 03, 2022 8:22am

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Post# 34650384

RBC

Their current and upside scenario targets are $45 and $65. GLTA

May 2, 2022

Interfor Corporation
Acquiring a minority interest in GreenFirst

Our view: We positively view Interfor's acquisition of a stake in GreenFirst given that it will increase the company's effective exposure to Eastern Canada and is relatively modest in size, at $56 million, in the context of the company's financial position (e.g., the company had $539 million of cash at YE21 and we forecast free cash flow of $667 million in 2022). Over the longer term, we wonder whether it would be possible to achieve operational synergies through a more meaningful transaction given overlapping asset footprints with EACOM.

Key points:

Interfor acquires a minority interest in GreenFirst. Interfor announced that it acquired 28.7 million common shares in GreenFirst Forest Products ("GreenFirst") from Rayonier Advanced Materials ("Rayonier Advanced"). Cash consideration was roughly $56 million, or $1.94 per share, with Interfor's stake representing ownership of approximately 16.2% of GreenFirst's outstanding common shares. The transaction includes a purchase price protection clause that will allow Rayonier Advanced to participate in further stock price appreciation under certain circumstances.

Interfor's investment follows the company's acquisition of EACOM, another Eastern Canada-focused company. Management noted that the acquisition of the stake in GreenFirst "builds upon, and is complementary to, recent expansion into Eastern Canada through the acquisition of EACOM Timber Corporation". While Interfor stated that it had acquired the shares for "investment purposes", we wonder if there could be potential operational synergies gained through combining the platforms at some point in the future. Both EACOM and GreenFirst operate in Ontario and Quebec, with GreenFirst's lumber assets comprised of a sawmill in Kenora, as well as a package of six lumber mills (and one newspaper mill) acquired from Rayonier Advanced in August 2021; please see Exhibits 1 and 2 for more information on GreenFirst's and EACOM's assets. Additionally, please click here to read our thoughts on Interfor's $490 million EACOM acquisition from the time of its announcement.

We think that GreenFirst is well positioned to create shareholder value over the coming years. We rate GreenFirst shares Outperform with a $3.00 price target. Please click here to read our March 29, 2022 initiation of coverage note.

Rayonier Advanced will use the proceeds to delever. Rayonier Advanced stated that it would use the cash proceeds from this transaction to opportunistically repay debt or assist with a holistic refinancing of its capital structure (including its senior notes due in June 2024). We highlight that an activist investor announced in mid-April that it held approximately 75% of the company's 2024 notes, with Rayonier Advanced stating that it had attempted to engage the investor constructively regarding its refinancing proposal but had determined that it is not in the company's best interests.