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Billionaire Jim Pattison’s Bid for Canfor Faces Mounting Opposition

Billionaire Jim Pattison’s Bid for Canfor Faces Mounting Opposition

(Bloomberg) -- The bid by billionaire Jim Pattison to take Canfor Corp. private is facing growing opposition from shareholders, though the investment firm has no plans to sweeten its bid for the Canadian lumber company.

Several investors have balked at Pattison’s offer of C$16 a share, saying it undervalues the firm that traded at more than twice that price in 2018. Proxy votes were due today, with results being released later and a final vote on Wednesday in Vancouver still possible.

“I don’t know” if the vote will go through, Glen Clark, president of The Jim Pattison Group that controls Canfor, said in a phone interview. “Fairly large shareholders have indicated that they prefer to stay in, and from a Jim Pattison point of view we’re quite relaxed about it because we control the majority of the company in any event.”

The Pattison Group, through its subsidiary Great Pacific Capital Corp., launched a C$981.6 million ($746 million) bid to take Canfor private in August. Great Pacific owns 51% of the stock, and for the deal to go through, a majority of the remaining shareholders must support it.

Investors including money manager Letko Brosseau & Associates Inc. have voiced their displeasure at the deal. The company says it owns 4.6% of Canfor and is among the largest minority shareholders.

“This offer is very opportunistic, we don’t think it reflects the full value of the company,” Stephane Lebrun, senior portfolio manager with Montreal-based Letko Brosseau, said in a phone interview. The company has been receiving “lots of calls” from shareholders and professional portfolio managers who aren’t happy with the offer, with Lebrun saying they expect it to be a tight vote.

Higher Bid

Lumber market analyst Mark Wilde at BMO Capital markets is puzzled by the deal and doesn’t understand why more people haven’t spoken out against it. The bid “could have been a dollar or two higher and I would have still felt like it was a pretty significant undervalue,” he said in a phone interview.

If the bid isn’t successful, the Pattison Group won’t be relaunching it with a sweetened bid, Clark said, adding there is still too much risk in the British Columbia lumber industry to warrant a higher price.

The bid was launched when lumber futures were depressed and the sector’s stocks had dropped. Pattison’s offer was an 82% premium over the previous closing price on Aug. 9. The stock traded Monday at C$15.54 in Toronto, below Pattison’s offer price.

Canadian-based lumber companies were facing multiple problems at the time of the bid. There was a reduced supply of logs in British Columbia after a mountain pine beetle infestation forced companies to clear trees, and forest fires reduced supply. The sector was also buffeted by reduced U.S. housing starts and import tariffs.

The industry rebounded in the fall after lumber companies curtailed supplies and the U.S. housing market recovered. Lumber futures in Chicago have climbed 33% from market lows in June to over $400 per 1,000 board feet. With reduced supply from the curtailments, lumber supplies will tighten in North America, pushing futures higher next year, said Kevin Mason, managing director of ERA Forest Products Research, in phone interview.

Clark is hoping the lumber market outlook is correct, but still sees headwinds.

We think the lumber industry will recover “or we wouldn’t be buying the company,” said Clark, a former premier of British Columbia.

To contact the reporter on this story: Ashley Robinson in Winnipeg (Non BLP Loc) at arobinson193@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, David Scanlan, Jacqueline Thorpe

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