Vancouver-based West Fraser Timber Co. Ltd. is selling its pulp mill in Hinton, Alberta, to Mondi Group plc, which plans to make major upgrades to the operation.
"This transaction creates a sustainable long-term future for the pulp mill, while maintaining the integrated fibre supply chain in place with West Fraser's operations in the region," said Ray Ferris, president and CEO of West Fraser in announcing the deal. "The relationship with Mondi puts the Hinton pulp mill in the hands of a global industry leader, with the vision and experience to maximize opportunities for local employees and the community.”
West Fraser will supply the mill with residue from its nine Alberta sawmills under a long-term contract. Mondi, in turn, will invest approximately $584 million (400 million euros) in expanding the Hinton pulp mill through the acquisition of a new 200,000 tonne per annum kraft paper machine.
The investment is about five times the current carrying value of the mill, which West Fraser reports as $115 million. The mill has liabilities of $111 million, meaning West Fraser will see scant proceeds from the sale.
West Fraser scaled back operations at the 67-year-old mill last year, cutting 75 jobs and shutting down one of its production lines.
“Hinton Pulp has been in operation since 1956 and these changes are necessary to simplify our operation, reduce capital requirements and greenhouse gas emissions, and better align with consumer expectations,” Ferris said at the time.
Mondi describes itself as “an integrated packaging and paper company” with 100 plants in more than 30 countries. The deal with West Fraser gives it its first pulp mill in Canada.
"We are delighted to be making this investment in Canada,” Andrew King, CEO of Mondi Group said in a statement, saying the company will work to ensure the long-term sustainability of the mill.
Mondi reported annual revenues in 2022 of nearly $13 billion. This is on par with West Fraser’s revenue last year of $12.8 billion.
West Fraser expects the deal for the Hinton mill to close later this year, following regulatory reviews. West Fraser promises further details in a review of its second quarter results. A date for their release has not been set.
