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Interfor Gains Foothold in One of World's Hottest Housing Markets With Sawmill Takeover

Interfor Agrees to Buy Sawmill Owner in Eastern Canadian Push

Western Canadian lumber producer Interfor Corp. is expanding eastwards after striking a C$490 million ($385 million) deal to buy a sawmill owner that serves some of the country’s hottest housing markets.

Interfor agreed to buy Eacom Timber Corp. from an affiliate of U.S. private equity firm Kelso & Co. to gain operations in Ontario and Quebec, the Vancouver-based company said Tuesday in a statement. Eacom’s assets include seven sawmills with annual capacity of 985 million board feet and a remanufacturing plant. The deal will boost Interfor’s lumber output capacity by 25% and growth beyond its existing markets in Western Canada, the U.S. South and Pacific Northwest.

“The opportunity for future growth in that region is attractive to us,” Chief Executive Officer Ian Fillinger said Tuesday in a phone interview. “We’re sure that from having that presence there will lead to further discussions, just like it has in the U.S. South.”

Interfor also gains access to the housing market in Toronto, Canada’s most populous city, and comes as “we see some fundamentals that are very strong going forward,” Fillinger said. Demand “looks promising” for homebuilding and as more people fix up their homes amid the pandemic, he said.

Lumber prices touched record highs earlier this year amid a Covid-19 fueled homebuilding boom, then collapsed as sawmills ramped up production and high prices stifled demand. Futures are still up more than 20% from a year earlier. Frenzied homebuying in Canada earlier this year made the nation’s housing market among the hottest in the world.

Interfor Gains Foothold in One of World's Hottest Housing Markets With Sawmill Takeover

Canadian lumber producers have been expanding capacity in the U.S. South in recent years, where timber plantations are plentiful and log prices are lower than in Canada’s westernmost province of British Columbia. 

Interfor shares jumped as much as 4.3% after announcing the deal, though gave up some gains to trade 1.5% higher at C$32.21 as of 12:41 p.m. on the Toronto Stock Exchange. The acquisition is expected to close in the first half of 2022 and Interfor intends to finance the deal with cash on hand and existing credit facilities.

“The acquisition of Eacom makes a lot of sense for Interfor given the company’s focus on growing its North American lumber footprint,” RBC Capital Markets analyst Paul Quinn said Tuesday in a note. “From a valuation perspective, we think Eastern Canada offers good value given that there is relatively less competition than in the U.S. South.”

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