Norbord To Become Largest OSB Producer

Norbord Inc. and Ainsworth Lumber are merging and creating the largest OSB producer in the world with production capacity of 7.7 billion SF, according to the companies.

The transaction entails Ainsworth shareholders receiving 0.1321 of a Norbord share for each Ainsworth share.

The combined company generated USD $1.63 billion in sales and USD $143 million in Adjusted EBITDA for the 12 months ended September 27, 2014.

The transaction combines Norbord’s low cost operations and larger mill network with Ainsworth’s innovation in value-added strand-based engineered wood products, according to the ­companies.

“This transaction unites two complementary businesses behind a common vision of enhanced service to our customers and growth in North America, Europe and Asia,” says Peter Wijnbergen, Norbord’s president and CEO. “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.”

Norbord, based in Toronto, operates seven OSB North American mills (six of them in the U.S. South) with one mill in Quebec, along with four mills in Europe. Ainsworth, based in Vancouver, BC, operates four Canadian OSB mills—three in Western Canada and one in Ontario. Prior to this transaction, Norbord reported it was third in OSB production capacity behind Louisiana-Pacific and Georgia-Pacific.

“The combined company will be better able to weather market cycles through increased geographic diversification. The transaction will enhance each company’s strong North American presence with the more stable margin European operations of Norbord and Asia-focused export business of Ainsworth,” according to a statement.

The new company will have opportunities to increase capacity through the expansion of Norbord’s OSB production in Western Europe, the restart of Norbord’s two idled mills in North America, and the completion of Ainsworth’s second line in Grand Prairie, Alberta.

Management expects that the combined company will deliver significant cost savings through substantial operating synergies estimated at USD $45 million annually, achievable over an 18-24 month period.

The combined company will operate under the Norbord name, and Norbord CEO Wijnbergen will lead the business following the close of the transaction. Ainsworth CEO Jim Lake has agreed to stay on with the combined company in an advisory capacity for six months.

Upon completion of the transaction, Norbord shareholders will own approximately 63% and Ainsworth shareholders will own approximately 37% of the combined company.

The transaction, which was approved by the companies’ respective boards, is expected to close in the first quarter of 2015. The transaction is not reportable under the U.S. Hart-Scott-Rodino Act or the Canadian Competition Act due to common controlling shareholder; however, U.S. and Canadian antitrust and competition authorities may review the transactions at their discretion.

Brookfield Asset Management, which controls 52% and 55% of Norbord and Ainsworth shares, respectively, has entered into voting support agreements for the transaction.

In 2014, Ainsworth and Louisiana-Pacific announced LP’s purchase of Ainsworth, but after determining that regulatory approvals couldn’t be obtained without significant divestitures and expensive litigation, they canceled the deal.

The U.S. Dept. of Justice had said that the transaction likely would have substantially lessened competition in the market for the production of OSB sold to customers in the Pacific Northwest and Upper Midwest regions of the U.S.

RELATED ARTICLES

WEST FRASER PURCHASES NORBORD FOR $3 BILLION