Domtar Sells Forest Products Business to EACOM Timber

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Domtar Corp., Montreal, Que., Canada, this past week completed selling its Forest Products Business to EACOM Timber Corp., Richmond, B.C., Canada, for C$80 million plus elements of working capital of approximately C$46.5 million. Domtar received 19% of the proceeds in shares of EACOM, resulting in an ownership interest of approximately 11.74%.

The transaction includes five operating sawmills: Timmins, Nairn Centre, and Gogama in Ontario, and Val-d'Or and Matagami in Quebec, as well as two non-operating sawmills—Ear Falls in Ontario and Ste-Marie in Quebec. The sawmills have approximately 3.5 million cubic meters of annual harvesting rights and a production capacity of close to 900 million board feet. Also included in the transaction is the Sullivan remanufacturing facility in Quebec and Domtar's interests in two investments—Anthony-Domtar Inc. and Elk Lake Planing Mill Ltd.

In conjunction with the closing, EACOM issued 48,070,712 common shares to Domtar as partial consideration for the sale by Domtar Inc. and Domtar Pulp and Paper Products Inc., both wholly-owned subsidiaries of Domtar Corp., of their Forest Products Business pursuant to an Asset Purchase Agreement entered into as at March 26, 2010.

In its financial statements for the quarter ended June 30, Domtar says it will record a charge of approximately C$37 million related mainly to the loss on disposal of the Forest Products Business and related pension curtailments. Domtar will incur further charges of C$15 to C$20 million in future periods related to pension settlements resulting from the transaction.

Domtar is the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second largest in the world based on production capacity, and is also a manufacturer of paper grade, fluff, and specialty pulp.