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Weyerhaeuser begins 'new chapter' with Domtar merger

KEVIN CASTLE • Mar 7, 2007 at 9:39 AM

Charlie Floyd, Weyerhaeuser plant manager, discusses the merger between the paper company and Domtar. Erica Yoon photo.


KINGSPORT - A $3.3 billion merger first announced last summer between Canada-based Domtar and Kingsport's Weyerhaeuser paper mill became official on Wednesday.

Plant Manager Charlie Floyd outlined the future of the Model City plant, which has been a fixture in Kingsport since its modest beginning 90 years ago as the Kingsport Bulk Co.

That future includes Domtar now becoming the leading uncoated freesheet paper manufacturer in North America.

"Today we turn a page and move to a new chapter in a long, rich and exciting history of this great operation," said Floyd.

The Kingsport plant and its 332 employees are now placed alongside five other Domtar facilities across the country, creating an overall synergy investment of $200 million by 2008, Floyd said, and establishing a sales base of close to $7 billion annually.

The production capacity - with the Kingsport facility being the newest of the factory line for Domtar with a recent $480 million overhaul of plant operations - overall will provide global customers with 4.9 million tons of uncoated freesheet paper on an annual basis.

Domtar also currently has a stake in 43 percent of the nation's cutsize or copy paper market, according to Floyd, and will unite with the company's 80 paper distribution centers across the United States, making it one of the largest in North America.

Floyd also reiterated the formal merger plans announced last August, which call for Weyerhaeuser, the previous parent company, distributing ownership of the fine papers business to its shareholders in either a spin-off or split-off transaction.

In a spin-off, shareholders would get a prorated number of shares of the fine papers business. In a split-off, shareholders would have the option to exchange Weyerhaeuser shares for stock in the combined company.

Weyerhaeuser shareholders will own 55 percent of the newly formed company, while Domtar shareholders will own 45 percent, the company stated Wednesday.

"The combination of knowledge and expertise in the design, manufacturing, marketing and distribution of fine paper gives the company, which will benefit from its efficient assets located across the United States and Canada, clear competitive advantages in the breadth and quality of products and services we offer," said Domtar President and CEO Raymond Royer in a prepared statement issued at the press conference held at the plant Wednesday.

Weyerhaeuser will get $1.35 billion in cash as part of the deal, which company officials said they plan to use to pay down debt. Domtar stock will make up the remainder of the $3.3 billion transaction.

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