now a major forest
industry player

In a very short period of time, GreenFirst Forest Products has become a new major player in Canada’s forest industry—and it couldn’t have picked a better time, in terms of lumber prices.

BY TONY KRYZANOWSKI

The acquisition trail for GreenFirst Forest Products began with its purchase of Kenora Forest Products. The Kenora sawmill is capable of producing between 150 to 200 million board feet of lumber annually.

It started with a ripple, with the acquisition of bankrupt Ontario-based Kenora Forest Products last fall. It ended with a tidal wave, with the purchase of four sawmills in Ontario and two in Quebec, along with an Ontario newsprint plant, from Rayonier Advanced Materials (RYAM) this spring.

That summarizes—in a nutshell—the transactions over the past six months by a new, publicly-traded, player in the Canadian forest industry: GreenFirst Forest Products (GFFP).

And they may not be finished yet in Canada or elsewhere, as the company’s goal is to become a global forest company capable of producing at least one billion board feet of softwood lumber annually. Once the RYAM transaction is finalized, GFFP will become a top ten lumber producer in Canada.

A number of individuals are behind this enterprise. led primarily by Rick Doman and Paul Rivett, the former of whom has been involved with the Canadian forest industry for decades.

Doman founded major Eastern Canadian forest products manufacturer EACOM Timber Corporation in 2010, by purchasing the sawmill assets of Domtar Corp. He later sold the company to Kelso & Company in 2013. Prior to that, he was President and CEO of the company founded by his family, Doman Industries, in British Columbia, which is now Western Forest Products.

He was recently named the new CEO at GFFP.

“I’ve been in the forest industry since I started my first job in a lumberyard at 12–years-old,” said Doman, in an interview with the Logging and Sawmilling Journal. “I wanted to buy a set of drums and my Dad told me to get to work and save up to buy them. I never looked back. I enjoy the forest industry very much and most of all, I like to be involved in creating jobs, which is very rewarding to me.” His Dad was, of course, the legendary Herb Doman, who founded Doman Industries, and built it into one of the major forest companies in B.C., back in the day.

Rivett was previously a board member at Resolute Forest Products and Abitibi Bowater. He has experience with acquisitions and financing involving both Tembec and EACOM and was President of Fairfax Financial Holdings from 2013 - 2020. He is the new Chairman of the Board at GFFP.

Doman says that Michel Lessard, currently Vice-President of Canadian Forestry Operations with RYAM, will become President of GFFP in charge of all operations and report to the CEO. Lessard held a similar position with Tembec before it was purchased by RYAM.

Doman’s and Rivett’s acquisition trail began with a group of investors and a company named Itasca. It had capital investment cash available, and at the urging of Rivett, the company made a bid and was successful with its $11.5 million offer to purchase the assets of Kenora Forest Products. A name change to GreenFirst Forest Products quickly followed.

Then they purchased the RYAM sawmills and a newsprint plant for $214 million (U.S.) in April. These essentially are the Tembec sawmills that RYAM acquired when it purchased that company in November 2017. The deal between GFFP and RYAM is expected to close in the second half of 2021. It is a combination of 85 per cent cash and 15 per cent common shares, and it’s anticipated that at the time of closing, RYAM will own about 16.9 per cent of GFFP shares, subject to a six month hold. Senvest Management is providing a significant amount of backstop financing to GFFP to make the purchase.

“GreenFirst is looking forward to extending a warm welcome to RYAM’s employees later this year and to building on RYAM’s established relationships with its lumber and newsprint customers,” says Rivett.

So now GFFP owns operating Ontario sawmills in Chapleau, Cochrane, Hearst and Kapuskasing, Ontario as well as sawmills in Bearn and La Sarre, Quebec. The newsprint plant is in Kapuskasing. Kenora operations are currently idled but the company intends to restart operations there once it obtains clarification from the Ontario government on the wood resource available for that sawmill. Combining all wood processing facilities, GFFP will employ about 1,500 workers.

“As we have done previously with EACOM on the carve-out of sawmill assets of Domtar, our experienced team looks forward to working with the dedicated employees of RYAM to optimize the sawmill assets with a singular focus on maximizing lumber production,” Doman said in a press release announcing the transaction with RYAM.

In 2020, RYAM’s sawmills produced 604 million board feet of lumber, but together have a nameplate capacity of 755 million board feet. With this purchase, GFFP will also have access to 3.29 million cubic metres of guaranteed fibre support for these sawmills. They produce a wide range of lumber products and grades, with a focus on MSR, premium products, and regular dimensional lumber ranging from 2” x 3” to 2” x 10”, consisting of both studs and random length lumber.

The Kenora sawmill is able to produce between 150 to 200 million board feet of lumber annually.

Winnipeg-based Prendiville Industries operated the Kenora Forest Products sawmill, which has since been rebranded as GreenFirst Forest Products. It operated the sawmill from 1994 onwards, but it was closed from 2008 till 2016. There was a significant amount of government support offered to the previous owners to get the sawmill up and running again and over $22 million was spent to refurbish the mill before it reopened. But it was still not enough for Prendiville Industries to keep the sawmill operating, partly because of the 20 per cent softwood lumber tariff on shipments to the U.S. At the time of bankruptcy filing in December 2019, the company owed $8.8 million to federal and provincial agencies. Since this filing, the softwood lumber tariff has been reduced to about nine per cent for most Canadian producers.

“We felt it was a great opportunity, so we bid on it and we are very pleased we were the successful bidder,” Doman says. “To build new sawmills is costly, so being able to purchase Kenora at an attractive value was very positive for our company.”

The question of log supply is still an issue as to when it will actually reopen.

“We are waiting on the Ontario government to provide us the directed log supply we need from Crown forests,” Doman adds. “The mill, we believe, will operate productively with about 650,000 cubic metres of long-term, sustainable, economical Crown log supply.”

Once that is secured, the new owners are interested in working with private timberland owners in the area to supplement their wood supply and maximize production.

As part of the purchase agreement with RYAM, GreenFirst Forest Products will enter into a 20-year chip supply agreement to continue to support RYAM’s pulp facilities.

The newsprint plant included in this deal has annual production of 205,000 metric tonnes per year.

Doman says that the transaction to purchase the RYAM sawmills was something that GFFP “worked very hard to pursue and conclude,” adding that he has a lot of respect for the company. The fact that lumber prices rose to historical highs in the process of negotiations was not particularly a driving force behind the purchase, but it was not totally unexpected either.

“We had a view that lumber prices would rise due to the impacts from the mountain pine beetle, and housing demographics have also been and continue to be positive in the U.S. and Canada,” Doman says. “We also believe that wood-based construction is positive for the environment, sustainable forests absorb carbon, and also wood-framed housing continues to absorb carbon.”

They recognized that high-rise buildings for both residential and commercial use are starting to be built from wood products, as well.

Another factor working in their favour is ‘a changing cost-curve’ that is favourable to the lumber industry in Ontario and Quebec. Asked to describe this ‘changing cost-curve’, Doman says, “we view Eastern Canada positively due to access to large markets and being closer in freight by truck and rail, in particular, within Eastern Canada, the U.S. Northeast and Midwest, as well as some other markets.”

Once the transaction is complete, the new owners already have intentions to review current operations and spend major capital to improve efficiency and throughput at all their new sawmill properties.

“We intend to increase lumber capacity,” Doman says. “Our message to our employees is our goal is to build a productive lumber company. We are prepared to spend targeted capital to improve the sawmill assets. The bottom line is that we need to bring cash operating costs down and increase production.”

He says that GFFP plans to spend between $50 million to $60 million over 36 months to improve sawmill operations.

Doman concludes that the goal is to build a global company that is resilient, capable of riding out and continuing to operate in any lumber market.

The lumber market has taken off to the stratosphere during the COVID-19 pandemic, with lumber futures prices hitting in excess of $1,600 (U.S.) per thousand board feet, which makes the deal GreenFirst Forest Products did with Rayonier Advanced Materials for four sawmills in Ontario and Quebec a very smart move indeed.