Canadian timber company Resolute Forest Products agreed to acquire three U.S. sawmills from Conifex Timber for $163 million, plus working capital delivered at closing. The three sawmills have a combined production capacity of 550 million board feet and are located in Cross City, Fla., Glenwood, Ark., and El Dorado, Ark. The transaction, subject to regulatory approvals and customary conditions, is expected to close in the first quarter of 2020.

"This transaction will provide immediate scale in the attractive U.S. South, with quality assets in a rich fiber basket, close to growing end-markets," Resolute Forest Products president and CEO Yves Laflamme said in a public statement. "Scaling our lumber business forms a key part of our stated transformation strategy. This transaction will also diversify our lumber production: when operating to capacity, almost 25% of our production will be in the U.S. South."

The three sawmills produce construction-grade dimensional lumber and decking products from locally-sourced southern yellow pine for distribution across the U.S. The Cross City facility is currently operating on a two-shift basis with production capacity of 185 million board feet. The Glenwood facility, operating on 1.5 shift basis, also has a production capacity of 185 million board feet. In August, Conifex idled the production at its El Dorado mill, which the company estimated reduced production capacity at the sawmill to 180 million board feet.

Resolute plans to build on Conifex’s significant recent capital investments to the three southern sawmills. Conifex invested $55 million in its El Dorado mill, $23 million in its Glenwood mill, and $12 million in its Cross City mill in recent years.

Resolute believes it is “well positioned” to generate synergies from the acquisition by completing the necessary capital upgrades of around $20 million. The money will be used to gradually restart the El Dorado mill in 2021 and integrate corporate functions along with pulp, paper, and tissue assets in neighboring states. This, the company maintains, will be done to generate synergies in fiber procurement, environmental management, and human resources management.

Resolute anticipates that most employees currently associated with the three mills, including management, will remain with the organization. Resolute Forest Products owns or operates 40 facilities in the U.S. and Canada and provides pulp, tissue, wood products, newsprint, and specialty papers to nearly 70 countries.