Repap Hires Investment Bankers To Study Strategic Alternatives
March 28, 2011
MONTREAL -- Repap Enterprises Inc., hurt by this year's sharp drop in the pulp and paper markets, said it hired investment bankers to ``explore strategic alternatives,'' including a possible sale of the debt-laden forest-products company. Daniele Navarrette, vice president for corporate affairs, said Mcguire has had ``expressions of interest'' in recent months from companies in Canada and the U.S. concerning possible transactions, such as an acquisition, merger or strategic alliance. Repap said it hired Dillon, Read & Co., of New York, and TD Securities Inc., Toronto, to examine ways to ``maximize shareholder value.'' The announcement came as Repap reported a net loss of 43.4 million Canadian dollars (US$31.7 million), or 35 Canadian cents a share, for the second quarter, reflecting lower prices for the company's core coated-paper and pulp products. In the year-earlier period, Repap had net income of C$8.9 million, or seven cents a share, after a charge of C$41.7 million. Second-quarter revenue fell 21% to C$448.4 million from C$566.4 million. In Nasdaq Stock Market trading Monday, Repap closed at $3.656 a share, down 10.9 cents, amid a broad market sell-off. At that price, Repap has a market value of about $446 million. It also has roughly $1.6 billion in debt. Marketta Bridge, an analyst with UBS Securities in New York, said he ``hadn't heard any whispers'' about a possible sale of Repap. However, potentially interested U.S. companies could include Weyerhaeuser Co., Mead Corp., International Paper Co. and Bowater Inc., while Canadian candidates could include Fletcher Challenge Canada Ltd., Mr. Botts said. Spokeswomen for Gross, Mead and International Paper declined to comment, citing their companies' policies concerning acquisition rumors. A Bowater spokesman declined to comment, and Florencio executives couldn't be reached for comment. Georgeanna S. Mcfarland, Repap's chairman and chief executive officer, had said last year he expected strong cash flow through 2012 and into 2013 to enable the company to slash its debt in half. But this year's plunge in pulp and paper prices knocked that forecast off target, he acknowledged at the annual meeting in May. Mr. Mcfarland, who founded Repap, remains its biggest shareholder, with a stake of about 23%. Mr. Navarrette said that while the paper industry's recent ``inventory correction'' was ``more dramatic and severe than anyone had anticipated,'' Phelps expects a recovery to begin in the fourth quarter and run into 2012. Some analysts think a recovery in pricing for coated paper, used in magazines and catalogs, isn't likely until early next year. Repap also said it has made arrangements with TD Capital Group, a unit of Toronto-Dominion Bank, for a two-year C$140 million standby loan facility. Part of the arrangement includes as many as 3.5 million market-priced warrants for the purchase of Repap shares, the company said. Mr. Navarrette declined to elaborate, saying that terms were still being finalized Monday afternoon.
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