West Fraser Announces Major U.S. Acquisition

West Fraser Timber Co., Vancouver,. B.C., Canada,  this week announced that it has entered into an agreement to acquire the operations of the Gilman Companies from the Howard Gilman Foundation and other shareholders for approximately $430 million, subject to certain post closing adjustments. The Gilman Companies is comprised of six sawmills and a finger joint mill in Florida and Georgia (USA) as well as an administrative office in St. Marys, Ga.  The transaction, which also is subject to U.S. regulatory approvals and customary conditions, is anticipated to close in the third quarter of 2017.

The operations employ approximately 900 people and have a combined annual production capacity of 700 million board feet of lumber. All of the mills produce lumber from southern yellow pine. After considering estimated tax benefits, the purchase price represents approximately six times trailing 12 months EBITDA of the acquired operations. In the 12 months ended June 30, 2017, the Gilman Companies generated EBITDA of $67 million on estimated sales of $330 million.

The acquisition is an important step in West Fraser's continuing expansion of its U.S. lumber operations. Upon completion of this transaction, West Fraser will have combined Canadian and U.S. lumber production capacity of 7.2 billion board feet. Canadian capacity of spruce/pine/fir (SPF) lumber will represent 57% of capacity and U.S. capacity of southern yellow pine (SYP) lumber will represent 43% of capacity.

"We look forward to welcoming our new employees to the West Fraser organization. The Gilman Companies' strong management team combined with high margin operations fits well with our existing U.S. platform of mills," said West Fraser's President and CEO Ted Seraphim. "This is a long term strategic move that strengthens our core lumber business and gives us increased scale and geographic diversification. Growing our lumber business has been one of our key strategic goals," said Seraphim. "This is a rare opportunity to acquire a U.S. lumber producer of a meaningful scale with high quality facilities and a culture similar to our own."

Mary Farrell, president of The Howard Gilman Foundation, said that "we are delighted to announce this transaction. West Fraser is a leader in the North American forest products industry, and through them, we have found a true partner for Gilman Building Products capable of providing strategic expertise and capital to grow and modernize the business. The Foundation has been a proud steward of the company for nearly 20 years and believes that a combination with West Fraser will deliver long term benefits to our loyal and long serving employees and the communities in which we operate.

On behalf of the directors, we would like to extend our sincere appreciation to all of the Gilman employees who have worked so tirelessly to ensure the success of Gilman Building Products. This transaction will enable the continuation of the charitable mission of the Foundation and ensure Howard Gilman's philanthropic legacy for many, many years to come," Farrell said.

West Fraser intends to finance the acquisition with cash on hand, available lines of credit, and a new five year $200 million credit facility to be made available in connection with the acquisition.

Annual synergies of approximately $10 million are anticipated to be achieved within three years as a result of this transaction. The synergies are expected to be achieved through non capital operational improvements and through implementation of best practices. The acquired mills also provide an attractive pipeline of high payback capital projects over the next three to five years.

West Fraser is a diversified wood products company producing lumber, LVL, MDF, plywood, pulp, newsprint, wood chips, and energy with facilities in western Canada and the southern U.S.