Canfor Corporation and Canfor Pulp Products Inc. announced that they have entered into an arrangement agreement pursuant to which Canfor Corp will acquire all of Canfor Pulp’s issued and outstanding common shares not already owned by Canfor Corp and its affiliates pursuant to a court-approved plan of arrangement under the Business Corporations Act.
Under the terms of the Arrangement Agreement, the shareholders of Canfor Pulp other than Canfor Corp and its affiliates, will have the option to receive, for each Canfor Pulp Share held: 0.0425 of a common share of Canfor Corp , or $0.50 in cash.
Canfor Corp currently owns approximately 54.8% of the issued and outstanding Canfor Pulp Shares. The $0.50 per Canfor Pulp Share represents a premium of 25% to Canfor Pulp’s closing share price on December 2, 2025, on the Toronto Stock Exchange (“TSX”) and a premium of 38% based on the 10-day volume-weighted average share price of Canfor Pulp as of December 2, 2025, on the TSX.
Transaction Rationale for Canfor Pulp
In determining that the Transaction is in the best interests of Canfor Pulp, the board of directors of Canfor Pulp considered a number of factors, including:
- Consideration reflects a premium to market price. The $0.50 per Canfor Pulp Share represents a premium of 25% to Canfor Pulp’s closing share price on December 2, 2025, on the TSX and a premium of 38% based on the 10-day volume-weighted average share price of Canfor Pulp as of December 2, 2025, on the TSX.
- Certainty of Cash Consideration. The option to receive Cash Consideration for their Canfor Pulp Shares provides Canfor Pulp Shareholders with immediate and certain value.
- Value proposition of Share Consideration. The Share Consideration being offered provides Canfor Pulp Shareholders the opportunity to participate in the combined business of Canfor Corp and Canfor Pulp after completion of the Transaction. The value of the combined business of the Combined Company after completion of the Transaction may benefit from, among other things, expanded ability to access capital and operational cost synergies.
- Independent valuation of Consideration. The formal valuation of Stifel Nicolaus Canada Inc., as independent financial advisor and independent valuator to the Canfor Pulp Special Committee , provides that in Stifel’s opinion, as at December 3, 2025, and based upon and subject to the assumptions, limitations and qualifications set forth therein, the fair market value of the Canfor Pulp Shares is in the range of $0.08 – $0.52 per Canfor Pulp Share.
- Review of strategic alternatives and Canfor Pulp’s business, financial condition and industry risks. The Canfor Pulp Special Committee considered, with the assistance of its financial and legal advisors, (i) current and forecasted liquidity needs of Canfor Pulp and the ability of Canfor Pulp to obtain adequate financing sources, including in light of its current debt levels and related covenant relief under its operating loan facility, (ii) uncertainty related to the business, financial condition and prospects of Canfor Pulp, including the challenges broadly affecting the pulp industry, and (iii) the relative benefits and risks of various strategic alternatives reasonably available to Canfor Pulp, including remaining as an independent public company.
- Go-Shop Period. The Arrangement Agreement includes a go-shop period extending until January 19, 2026, during which Canfor Pulp will be permitted to actively solicit, evaluate and enter into negotiations with third parties that express an interest in acquiring Canfor Pulp. Canadian Forest Products L2
- Ability to accept a Superior Proposal and support by Canfor Corp. The Arrangement Agreement provides Canfor Pulp with a “fiduciary out” for any Superior Proposal received by Canfor Pulp. Canfor Corp will not have the right to match a Superior Proposal made by a third party. In the event a Superior Proposal is identified, Canfor Corp has agreed to use its commercially reasonable efforts, in good faith, to negotiate and enter into a customary voting support agreement with the acquirer with respect to such Superior Proposal has determined, such Superior Proposal is in the best interests of Canfor Corp.
- Low termination fee. If Canfor Pulp terminates the Arrangement Agreement to accept a Superior Proposal, a $500,000 termination fee is payable by Canfor Pulp to Canfor Corp.
Transaction Rationale for Canfor Corp
In determining that the Transaction is in the best interests of Canfor Corp, the board of directors of Canfor Corp considered a number of factors, including:
- Opportunity for a stronger combined business. The Transaction provides an opportunity for the creation of a stronger combined business for the benefit of Canfor Corp and its shareholders. The Transaction will, if completed, streamline the ownership structure of Canfor Corp’s investment in Canfor Pulp and is expected to provide certain cost synergies. Once combined with Canfor Corp, Canfor Pulp is expected to have access to improved liquidity opportunities to help preserve the long-term value of Canfor Pulp’s operations in view of the risks and uncertainties related to its business, financial condition and prospects.
- Review of strategic alternatives. Canfor Corp and the Canfor Corp Special Committee have, independently and with financial and legal advisors, evaluated and explored strategic alternatives available to Canfor Corp to mitigate the risks related to its investment in Canfor Pulp and any potential opportunities to preserve and maximize its value.
- Go-Shop Period. The Go-Shop Period, together with the other terms and conditions of the Transaction, provides Canfor Pulp with the opportunity to enter into a Superior Proposal for the benefit of Canfor Corp and other shareholders of Canfor Pulp.
