The Jacksonville -based company Rayonier AM Inc. is set to shed some of its Canadian operations. The deal was announced on April, 12. Under the deal, Rayonier AM will sell a newsprint mill and six lumber mills to GreenFirst Forest products Inc. GreenFirst is a Vancouver-based company that invests in the global forest products industry.
As per the details released about the purchase agreement, GreenFirst will pay approximately $214 million to acquire the assets shed by Rayonier AM. Of the purchase price, approximately 85% will be paid in cash and the rest as common shares. The purchased mills are located in Ontario and Québec. Following the agreement, GreenFirst has also announced its intention to conduct a “Rights Offering” to satisfy a portion of the total cost.
This is not the first time that Rayonier AM has sold its Canada-based assets. In 2019, the company had sold a pulp mill in Québec to Sappi Ltd. – a pulp and paper company based in South Africa – for $175 million. Rayonier AM sales have continued to drop since 2019. The company is shedding a chunk of its Canadian operations to focus on its core cellulose specialties products.
“The sale of the lumber and newsprint businesses allows us to divest non-core assets at an attractive valuation and positions Rayonier Advanced Materials to further invest in the earnings growth of our core High Purity Cellulose assets and its bio-future while also reducing overall debt,” said the CEO of Rayonier AM in a statement.
The assets sold under the April 10 deal were acquired by RYAM in 2017 from the Montreal-based Tembec Inc. Following the acquisition, Rayonier’s revenue saw exponential growth and jumped from $961 million to $2.13 billion within the span of a year. This also earned the company a place in the list of the 1000 largest companies in the country issued annually by Fortune magazine. Rayonier was placed 951st on that list. Things have gone south for the company since then. Rayonier AM will shrink further in size following the deal with GreenFirst but the company hopes that the cash will help improve its operations.
Rising wood prices in Florida
Lumber prices have skyrocketed during the COVID-19 pandemic mainly due to a reduction in supply. The increase in wood prices is taking its toll on the homebuilding industry in Florida. Project delays and cancellations are commonplace. The cost of building a house in the Jacksonville area has remained somewhat stable over the last year but this is expected to change after the hike in lumber prices.
The impact is being felt by homebuilders but the trend will hurt home buyers more than anyone. High prices of construction materials always translate into the high cost of homebuilding. As it gets more and more expensive to build a house, property owners will have to be more vigilant when hiring a contractor. It is advised that property owners compare prices before hiring an enterprise to build a home, especially when it involves the use of wood.