Why Paper Excellence Is Buying Resolute Forest Products (RFP) In A $2.7 Billion Deal

By Amit Chowdhry ● Jul 6, 2022
  • The Paper Excellence Group announced it is buying Resolute Forest Products Inc. (NYSE: RFP) (TSX: RFP) in a $2.7 billion deal. These are the details.

The Paper Excellence Group, through its wholly-owned subsidiary Domtar Corporation, a global diversified manufacturer of pulp and specialty, printing, writing, and packaging papers, and Resolute Forest Products Inc. (NYSE: RFP) (TSX: RFP), a global forest products company, have entered into an agreement under which Domtar will acquire all of the outstanding common shares of Resolute stock. With this addition to its family of companies, the Paper Excellence Group is going to further build out its portfolio in North America following the successful acquisition of Domtar last year.

Resolute will become a wholly-owned subsidiary of Domtar, under the auspices of the Group, and continue to operate on a business-as-usual basis under the Resolute name. The Resolute management team will remain in place at the company’s headquarters. Considering the quality workforce available with Resolute and Domtar, Montreal will become an important hub for the Group’s North American businesses. Furthermore, the Group plans to retain Resolute’s production locations and levels of jobs.

As part of its commitment to building a premier North American diversified forest products company and creating long-term growth, the group plans to support Resolute management’s existing growth strategy, focused on strategic investments in its lumber and pulp businesses, and maximizing the value of its paper and tissue businesses. And it also plans to undertake a detailed feasibility study for the eventual conversion of Resolute’s Gatineau, Quebec, newsprint mill to the production of packaging paper. Plus the group intends to form long-term partnerships with one or more universities in Quebec and Ontario to spearhead innovation in the field of fiber-based biomaterials.

The cash portion of the merger consideration represents a premium of approximately 64% to Resolute’s closing share price on NYSE on July 5, 2022. And the cash consideration represents an enterprise value of approximately $2.7 billion, including pension liabilities and excluding the Contingent Value Right (CVR) on softwood lumber duty deposit refunds.

The deal will be carried out by way of a merger of Resolute with a newly created subsidiary of Domtar, providing for the conversion of each share of Resolute common stock into the right to receive $20.50 per share, together with a CVR entitling the holder to a share of future softwood lumber duty deposit refunds. Each share, on a fully diluted basis at closing, will be entitled to receive one CVR.

Under the CVR, stockholders will receive any refunds on approximately $500 million of deposits on estimated softwood lumber duties paid by Resolute through June 30, 2022, including any interest thereon, net of certain expenses and of applicable tax and withholding. And any proceeds attributable to the CVR will be distributed proportionally to CVR holders, and the value will ultimately be determined by the terms and timing of the resolution of the softwood lumber dispute between Canada and the United States. The terms and timing of such resolution is uncertain. The CVRs will not be tradeable and will be subject to prohibitions on transfer.

The resolute stockholders will have the opportunity to vote on the transaction at a stockholders’ meeting to be held in early fall. The merger will require the approval of a majority of the outstanding shares of Resolute.

Fairfax Financial Holdings Limited, a significant stockholder of Resolute, has entered into a voting and support agreement to vote its shares in favor of the transaction. As of July 5, 2022, Fairfax Financial Holdings held approximately 30,548,190 shares, or 40% of the outstanding shares as of that date.

In addition to stockholder approval, the deal is subject to applicable regulatory approvals and the satisfaction of certain other customary closing conditions.


“We are excited to welcome Resolute and its employees to the Paper Excellence family. Resolute is an ideal fit for our long-term growth strategy. It complements our existing pulp, paper and packaging businesses and adds capabilities in lumber and tissue. We have seen firsthand that Resolute prides itself on its great people, strong assets and a culture of excellence going back more than two hundred years.”

“This is a good example of how the Paper Excellence Group’s diversified business, financial resources, and technical capabilities can open up new strategic avenues for assets that may otherwise face an uncertain future. This is but one example of our support and intention to implement significant investments aligned with Resolute’s strategic plan for the future.”

– Patrick Loulou, vice chair and chief strategy officer of the Paper Excellence Group

“With this transaction, Resolute will accelerate its growth as it gains access to more tools, capital and opportunities to pursue our ambitions with the combined resources of the Paper Excellence Group. This is good for employees and the communities where Resolute operates because we will continue to grow in a manner consistent with our core values of accountability, caring and trust that we hold dear. Together, we will form a stronger and more resilient, diversified forest products company, positioned to compete on a truly global scale, with a shared commitment to being a trusted business partner, dedicated to sustainability and to caring for its people and communities.”

“This agreement offers our stockholders the opportunity to realize a significant premium for their shares in cash, plus additional value with contingent value rights tied to the prospective recovery of accumulated deposits on estimated softwood lumber duties through the second quarter.”

– Remi G. Lalonde, Resolute’s president and chief executive officer

“The addition of Resolute enables us to continue executing our long-term business plan to drive growth to the benefit of all stakeholders. After the close of the transaction, the Paper Excellence Group will own or operate a collection of diverse, strategic assets across North America that allows us to deliver a wider range of high-quality products to our customers. This transaction continues to demonstrate the strong belief in the potential of our business model and we look forward to continuing to operate successfully and efficiently into the future.”

– John D. Williams, president and chief executive officer of Domtar