Wausau Paper, Mosinee, Wis., USA, reports that it has signed a non-binding Letter of Intent to sell its specialty paper business to a new company (NewCo) to be formed and controlled by investment funds sponsored by KPS Capital Partners L.P., New York, N.Y., USA. KPS is a private equity firm with significant experience in the paper industry and in completion of complex corporate carve-outs.
The specialty business, Wausau's biggest source of revenue in 2011, makes paper and paperboard for food packaging, labels, and writing papers. Selling the specialty paper business will allow the company to focus resources on its tissue business. Last month, Wausau announced that it would shut down its specialty paper mill in Brainerd, Minn., in the second quarter of this year. The company sold its print and color paper brands last year.
KPS also has signed a non-binding Letter of Intent to acquire another company and combine it with the specialty paper business within NewCo. Wausau has the option to have an initial ownership position in NewCo of up to 25%, with the opportunity to earn up to an additional 5% interest upon NewCo reaching certain performance thresholds.
Key highlights of the transaction are as follows: NewCo will acquire the assets of Wausau’s Rhinelander and Mosinee (see photo) mills in Wisconsin; the assets of Wausau’s Brainerd mill are not included in the transaction The transaction requires that the United Steelworkers ratify new collective bargaining agreements with NewCo. Wausau will retain legacy defined benefit pension and post-retirement liabilities related to the businesses being sold to NewCo .The initial cash purchase price will be approximately $130 million, subject to KPS’ confirmatory due diligence and adjustments for the ultimate treatment of certain transaction related liabilities and customary post closing adjustments.
Hank Newell, president and CEO of Wausau Paper, said that "we are pleased to have signed this letter of intent with KPS, which will provide proven operations and management leadership for the paper business along with new opportunities to expand its product offerings and market reach. This announcement represents an important step in the strategic repositioning of Wausau Paper, narrowing our focus on our Tissue business and creating additional value for shareholders."
The ultimate transaction is subject to acceptable confirmatory due diligence, ratification of new collective bargaining agreements, and satisfactory completion of effects bargaining, required regulatory clearances, final negotiation, and board approval of the definitive agreements, and certain other customary contingencies to closing, including third party financing. Wausau expects to finalize the transaction in the second quarter of this year.
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