B.C. businessman Jim Pattison makes bid to take Canfor private

Jim Pattison's Great Pacific Capital Corp. has made an offer to buy the rest of Canfor Corp. it does not already own for $16 per share, an offer that values the lumber, plywood, pulp and paper company at about $2 billion.

Shares in Canfor closed at $8.80 on the Toronto Stock Exchange on Friday. Shares bounced 70 per cent to $15 a share at the opening of trading Monday.

Vancouver-based Great Pacific already owns about a 51 per cent stake in Canfor and plans to take the company private. The cash deal is estimated at $981.7 million.

Great Pacific says the proposed transaction will allow for the elimination of the significant costs related to maintaining a public company listing and allow for reinvestment of that money in the company's operations.

Pattison, 90,  owns supermarkets, fisheries and billboards through his conglomerate holding company Great Pacific. He is a savvy investor who is known for building value and piloting companies through a downturn.

Analysts weigh in

CIBC Capital Markets analyst Hamir Patel said in an analyst note that he estimates the share offer represents a much lower valuation on capacity than other forestry deals in recent years.

He figures the $16 Cdn a share offer values Canfor's capacity of 6.55 billion board feet a year at $298 US per thousand board feet, well below the $615 US per thousand board feet West Fraser Timber Co. Ltd. paid for Gilman Co. in 2017 and the $525 US per thousand board feet Canfor paid for Elliott Sawmilling last year.

The lower valuation reflects Canfor's high exposure to B.C., where log costs have spiked from a supply crunch, as well as significant deterioration in market conditions over the last year, said Patel.

B.C.'s lumber industy has been hit by a slowdown in the U.S. housing market and in demand from China, as well as the impact of wildfires and the mountain pine beetle.

RBC Dominion Securities Inc. analyst Paul Quinn said in a note that he believes the deal has a high probability of closing as proposed, given how much of the company's shares The Jim Pattison Group already owns.

Quinn said the "vote of confidence" could spark more interest the forestry sector, which is struggling with a shortage of timber. Companies have responded by significantly cutting back capacity in the province, including numerous curtailments and several permanent mill closures.