Terrace Bay Pulp – More details on the deal with Aditya Birla Group

lumber Resolute Forest Products

lumberTHUNDER BAY – There are more details coming out on the sale of Terrace Bay Pulp to the Aditya Birla Group. Terrace Bay Pulp has been purchased by the Aditya Birla Group company Grasim Industries. The reported price is $300 million. The company, which has been closed for the past two months has access to 285,000 tonnes of paper grade pulp capacity. A report from India states that the pulp mill will be converted into rayon grade pulp to be used by Grasim for its viscose staple fibre operations.

The latest information:

  • Aditya Birla Management Corporation Private Ltd. has formed a new company called AV Terrace Bay that will own and operate the Terrace Bay mill
  • Terrace Bay Pulp has asked for an extension to its creditor protection period until October 31, 2012 in order to complete the sale and transfer to AV Terrace Bay
  • 13 non-binding letters of intent received for the mill by the deadline of Feb. 15, 2012
  • 8 of the parties attended mill tours and management presentations
  • 8 binding offers were received by the March 16th bid deadline
  • Of the 8 binding offers, 2 were to restart the mill as a going concern. 6 were from liquidation or decommissioning firms
  • 1 of the 2 going concern bids was in the form of a non-binding letter of intent and was subject to significant future due diligence and conditions
  • The Monitor (Ernst & Young), Terrace Bay Pulp, and the province of Ontario reviewed the bids and determined the offer from AV Terrace Bay was the superior offer, and the best opportunity to secure a long-term future for the mill

Purchase Price of the mill: AV Terrace Bay’s purchase price for the mill is $2 million plus the amount of the assumed liabilities. The assumed liabilities includes the approximately $24.2 million (plus accrued interest and costs) the mill owes the province of Ontario from a loan granted in 2010 allowing the mill to emerge from its first period of creditor protection. As a condition of the purchase agreement, the province of Ontario will forgive the provincial debt obligations of the mill. The total cash and cash equivalent value of the transaction is approximately $27 million.

Who signed the Purchase Agreement?: The purchase agreement was signed by Frank Dottori, Chairman of AV Terrace Bay Inc. and Peter R. Forestell, Q.C., Secretary of AV Terrace Bay Inc. for the purchaser, and by Wolfgang Gericke, Director of Terrace Bay Pulp Inc. as the seller. Frank Dottori is the current Chair of CRIBE – the Centre for Research & Innovation in the Bio-Economy. He founded Tembec Inc. in 1972 and was Tembec’s President and CEO from 1979 until he retired in 2006.
Conditions on the sale

In order to conclude the purchase agreement, AV Terrace Bay wants to enter into a new 5 year collective agreement with the unions at the mill by July 24. AV Terrace Bay will assume all the unionized employee related liabilities including wages, benefits, credit for years of service, pensions, and other employment-related amounts.

AV Terrace Bay will be required by the purchase agreement to offer employment to all the non-unionized employees on terms that are consistent with those currently in place between Terrace Bay Pulp and the employees.

Also, AV Terrace Bay will establish new benefits plans for both the unionized and non-unionized employees that are substantially similar to the benefits the mill already offered.

If AV Terrace Bay needs to terminate the employment of any employee, unionized or non, the employee will be credited with their past years of service at the mill.

The purchase agreement requires the sales transaction is closed before the end of July.