Blue Wolf Capital Partners, a private equity firm headquartered in New York, has sold two Southeastern US saw mills to Toronto-listed Conifex Timber for $200 million.
Structured as $150 million in cash and $50 million in Conifex stock, the deal also involves minority shareholders of Blue Wolf portfolio company Caddo River Forest Products. It marks a major expansion in the Southeast of the US for Vancouver-based Conifex.
The mills sold by Blue Wolf – the Suwannee Mill in Cross City, Florida and the Caddo River Mill in Glenwood, Arkansas – each have an annual lumber capacity of 185 million board feet, on a two-shift basis. Last year, each facility completed modernization and optimization projects costing $12 million and $14 million, respectively.
“After many years of investing in the sawmill industry in the Southeastern US, we are excited to join forces with the Conifex team,” said Blue Wolf partner Charles Miller, who will join Conifex’s board as part of the deal.
Founded in 2005, Blue Wolf closed its fourth fund, Blue Wolf Capital Fund IV, on $540 million in October. The firm favors controlling stakes and says its investments often involve the resolution of “complex challenges” relating to leadership transitions, distress or government regulation.
Forest and building products is one of six industries of focus for the firm and its portfolio includes Finch Paper Company, pulp and timber producer Northern Resources Nova Scotia and Twin Rivers Paper Company.
Blue Wolf had not responded to requests for comment at the time of publication.
Forest Research Group economist Jack Lutz told Agri Investor that the Conifex deal fits into a pattern of Canadian timber companies expanding in the US Southeast in recent years. For example, Canadian forest products company Canfor announced in February that it plans to construct a $120 million greenfield sawmill in Washington, Georgia, that will have a capacity of 275 million board feet.
“Every 10 years or so, they get tariffs slapped on them by the US and then there’s a big fight”
Jack Lutz, Forest Research Group
In 2014, TSX-listed lumber company Interfor Corporation paid $180 million to acquire Perry, Georgia-headquartered Tolleson Ilim Lumber Company in a transaction that bolstered its operations in the US Southeast by 75 percent.
“The mountain pine beetle killed off a significant portion of the forest there [in Canada], so they are going to have supply issues,” Lutz explained. “Every 10 years or so, they get tariffs slapped on them by the US and then there’s a big fight. It may or may not be resolved, but 10 years later there will be another one.”
There are relatively few mid-market private equity firms such as Blue Wolf that maintain a portfolio of wood products companies, according to Lutz. He added that the firm seems to be more oriented towards manufacturing than natural resources, highlighting that Blue Wolf has exited all 161,000 acres of New York timberland previously owned by a portfolio company, Finch Paper Holdings.
“These guys have found a little area of the world to play in that they can probably do pretty well in,” he said.