Wood-Products Firm Norbord Agrees to US$3.1B West Fraser Offer

Wood-products company Norbord definitively agreed to be bought by West Fraser in an all-stock deal valued at C$4 billion (US$3.1 billion).
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Norbord  (OSB) - Get Report shares were higher Thursday after Canadian forestry company West Fraser Timber definitively agreed to buy the Toronto wood-products company for C$4 billion (US$3.1 billion) in an all-stock deal.

Under the terms, Norbord holders will receive 0.675 share of West Fraser for each of their shares. That equals C$49.35 (US$37.78) per Norbord common share, based on West Fraser's close on Wednesday.

And that in turn is a 13.6% premium to Norbord's close on the TSX on Wednesday.

Shares of Norbord traded on the New York Stock Exchange at last check were up 8% at $35.88 at last check.

The strategy behind the deal: “Norbord’s [oriented strand board] production is a perfect complement to the West Fraser portfolio, enabling us to deliver a wider range of wood products, and making us a more complete, efficient and valuable partner for our customers,” said Raymond Ferris, president and chief executive at West Fraser, Vancouver. 

OSB is a type of engineered wood used mostly as sheathing and subflooring.

Ferris added that the Norbord business will also bring geographic diversity and "additional financial flexibility to pursue strategic growth opportunities," Ferris added.

Norbord said joining West Fraser "will allow us to expand our profile with our core new home construction customers, and provides a stronger platform to pursue our industrial OSB products strategy," said Peter Wijnbergen, president and CEO at Norbord. 

Both boards have approved the terms. TD Securities and Scotiabank have provided opinions to West Fraser's board that the terms are fair to the company's holders. RBC Capital Markets has done the same for Norbord's board and holders.

At closing, West Fraser holders will own 56% and Norbord holders 44% of the combined company.

Norbord's main shareholder, Brookfield Asset Management  (BAM) - Get Report, has agreed to vote its 43% stake in favor of the deal.

The transaction is subject to conditions including a vote of both companies' holders as well as clearance by the Ontario Superior Court of Justice and by regulators.

The companies hope to close the deal in the first quarter.