Analyst: Canfor Corp., West Fraser Timber Merger Speculation

Recent activity at West Fraser Timber Co. Ltd. has revealed that British Columbian billionaire Jim Pattison owns a significant minority stake in the company, prompting speculations of a merger with rival Canfor Corp., according to an analyst.

Pattison owns 10 percent of West Fraser, North America’s No. 1 lumber producer, said Paul Quinn, a paper and forest products industry analyst at RBC Capital Markets, and already owns a majority stake in Canfor, North America’s No. 2 lumber producer. “That automatically brings up the idea of Canfor and West Fraser coming together,” said Quinn. “It’s an interesting idea, but would be very difficult to accomplish.”

Pattison has owned the same stake in West Fraser since 2011, Quinn said. However, it wasn’t until after a series of share-repurchases by the company – which reduced the size of West Fraser’s pool of outstanding shares – that Pattison’s stake amounted to just over 10 percent, which is the threshold at which shareholders must disclose their holdings, under Canadian Securities Administration regulations.

Quinn mused about what a merger of the two would look like in a research note to clients. Since they are the two dominant forest companies in B.C.’s interior, Quinn sees certain “synergies” in a combination through reducing supply costs at combined operations, particularly the combined eight pulp mills between the two, and in a single head office. “I have no idea what (Pattison) wants to do,” Quinn said. “He obviously likes the (forestry) sector, it’s a good long-term investment.”

However, Quinn said because of Pattison’s history with owning big stakes in forest companies that merge (in 2003 he held big stakes in Canfor and Slocan Forest Products before they combined in a $455-million deal) “we could argue that a combination is a possibility.”

From the Vancouver Sun: vancouversun.com.

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