Clearwater Paper to acquire Cellu Tissue for US$502M; company will fund purchase through existing cash, US$350M of debt financing

Mathew Kearney

Mathew Kearney

Sep 16, 2010 – Business Wire

SPOKANE, Washington , September 16, 2010 (press release) – Clearwater Paper Corporation (NYSE: CLW - News) today announced it has agreed to acquire Cellu Tissue Holdings, Inc., an Alpharetta, GA-based integrated manufacturer of tissue products (NYSE: CLU - News), for approximately $502 million, including equity value of approximately $247 million and net debt of approximately $255 million. Clearwater Paper will pay $12.00 per share in cash for Cellu Tissue’s outstanding common stock and intends to fund the acquisition using a combination of existing cash on hand and $350 million of debt financing. Clearwater Paper has secured a financing commitment for the transaction from BofA Merrill Lynch.

Clearwater Paper believes the acquisition will be immediately accretive to earnings per share before taking into account an estimated $15-$20 million in net annual cost synergies expected by the end of 2012. The acquisition has been unanimously approved by both companies’ boards of directors and is expected to close in the fourth quarter of 2010, following Cellu Tissue stockholder approval, regulatory clearances, and other customary closing conditions. Weston Presidio and Russell Taylor, Cellu Tissue’s chief executive officer, which together own approximately 56% of Cellu Tissue’s common stock outstanding, have agreed to vote their shares in favor of the transaction.

“We are very pleased to have the opportunity to rapidly expand our tissue manufacturing footprint through the acquisition of Cellu Tissue and create a combined company with much stronger operational scale to better serve private label tissue customers. This acquisition, coupled with the previously announced construction of our new tissue machine and converting facilities in Shelby, North Carolina, is expected to provide both short and long-term value to our shareholders,” said Gordon Jones, chairman, president and CEO. “Clearwater Paper already has a national sales footprint, and this acquisition gives us a rare opportunity to immediately have a national manufacturing presence to increase service to our existing private label grocery customers and expand into new private label channels,” added Jones.

The expected strategic and financial benefits of the transaction are as follows:

* Opportunity for Clearwater Paper to establish a national manufacturing presence as a papermaker and converter of tissue products
* Customer growth with existing and new customers
* Increased Through-Air-Dried (TAD) capacity
* Logistical improvements through shipping and transportation synergies
* Combined company annual revenues expected to be approximately $1.9 billion
* Immediate accretion to earnings per share before synergies
* Expected annual net cost synergies of $15-$20 million by the end of 2012

Cellu Tissue’s well-developed private label and specialty tissue businesses, which include 10 sites, complement Clearwater Paper’s existing private label tissue and pulp and paperboard businesses.

In connection with the acquisition of Cellu Tissue, Clearwater Paper intends to tender for or defease Cellu Tissue’s outstanding 11.50% senior secured notes due 2014.

BofA Merrill Lynch acted as financial advisor and Pillsbury Winthrop Shaw Pittman LLP acted as legal advisor to Clearwater Paper. Goldman, Sachs & Co. acted as financial advisor and King & Spalding LLP acted as legal advisor to Cellu Tissue.

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