Ainsworth Lumber (TSX: ANS, Stock Forum) and Norbord (TSX: NBD, Stock Forum) moved to create a global giant in the oriented strand board (“OSB”) production sector when the companies announced today that they had signed a definitive agreement that would see them merge.
According to the news release, the transaction would result in the creation of one of the largest and lowest-cost OSB producers in the world providing a wide range of products for residential, industrial and specialty applications.
The agreement outlines a deal where Norbord agreed to acquire all outstanding common shares of Ainsworth in an all-share transaction in which Ainsworth shareholders would receive 0.1321 of a Norbord share for each Ainsworth share.
The transaction represents a 15% premium to Ainsworth's 20-day volume weighted average price and has been unanimously approved by the Independent Committees and Boards of Directors.
Controlling shareholder, Brookfield Asset Management, and its affiliated entities, currently hold 55% and 52% of the outstanding common shares of Ainsworth and Norbord respectively, and have entered into a binding agreement where they have committed to vote in favor of the transaction. Upon completion, the Brookfield entities will control approximately 53% of the combined company.
The deal is still subject to shareholder approval in a vote scheduled to take place January 2015 in separate special meetings and is also subject to customary closing conditions, including court approval of the plan of arrangement.
The combined entity is expected to benefit from geographically complimentary operations, a balanced portfolio of high quality assets, enhanced market diversification, a strong financial position, growth potential, improved capital markets presence and significant cost savings due to substantial operating synergies.
Norbord President and CEO, Peter Wijnbergen, commented on the deal, “This transaction unites two complementary businesses behind a common vision of enhanced service to our customers and growth in North America, Europe and Asia.”
He went on to explain, “Norbord and Ainsworth are each low-cost producers in their respective regions, and with our complementary operations and a more diverse range of specialty products, we will be better able to serve our customers across the globe. Ainsworth has excellent mills, a proven track record of innovation in value-added product development, and we look forward to working together. The growth potential we see in the combined company also offers significant value to our shareholders.”
Jim Lake, Ainsworth's President and CEO, added, “The combination of the two companies will mean tremendous opportunities for our people and our customers. By joining with Norbord we will be able to leverage its commitment to low-cost operational excellence to expand and improve our existing range of products and enhance our customer relationships.”
Then he concluded, “For our shareholders, this transaction offers significant potential for continued value creation as investors in a larger and better-capitalized company with ongoing participation in the current U.S. housing recovery. This is an exciting transaction for Ainsworth and its stakeholders.”
Ainsworth Lumber was in the news recently when the Vancouver-based company announced Q3 results at the beginning of November.
Ainsworth shares climbed 10.07% on the news to $3.28 per share.
Currently there are 240.9m outstanding shares with a market cap of $790.3 million.