DAILY NEWS Jul 26, 2004 4:47 PM - 0 comments

West Fraser To Acquire Weldwood

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West Fraser Timber Co. Ltd. announced that it has signed a definitive agreement to acquire Weldwood of Canada Limited from International Paper Company for C$1.26 billion in cash, subject to certain closing adjustments. The transaction will combine two of Canada's leading integrated forest products companies.

This transaction will make West Fraser the 3 rd largest lumber producer in North America and is expected to enhance its position as a performance leader among integrated forest products companies. The company will own and manage high quality manufacturing facilities and adjacent fibre in British Columbia and Alberta, as well as facilities in the southern United States.

West Fraser has arranged to finance the transaction with cash on hand and a fully nderwritten bridge debt commitment (subject to customary conditions) for the balance of the purchase price. Subject to market conditions, West Fraser may consider financing
a portion of the purchase price with equity, consistent with its ongoing commitment to maintain an investment grade balance sheet.

The transaction has been approved by the Boards of Directors of West Fraser and International Paper and is expected to close in the fourth quarter. "This is the transaction we have been waiting for," said Hank Ketcham, West Fraser's Chairman, President and CEO. "Geographically, culturally and strategically, Weldwood is an excellent fit for West Fraser. This transaction is all about continuing to execute the same strategy that has made West Fraser one of the performance leaders in the North American forest products industry.

"We expect the combined company will look a great deal like West Fraser does today,but with increased scale, enhanced geographic diversity and greater product
integration," said Ketcham. "Fundamentally, this transaction presents new opportunities to create value and establishes a strong platform for future growth."
Ketcham added, "We have great respect for Weldwood and its people, and we are counting on them to be an integral part of the combined company. As an added benefit,
we are proud to bring ownership of a great Canadian company back home with this transaction. Together we will continue to be active and committed participants in the
communities in which we operate, just as we have been in the fifty years since our two companies began operating in BC's interior."

Based on its current understanding of Weldwood's operations, West Fraser expects to achieve annual synergies of C$80 million. The company expects to begin realizing profit improvement immediately upon completion of the transaction, and to have achieved the synergies over the next three years. The projected synergies are expected to be achieved primarily by implementing best practices across the combined company's operations, leveraging off the geographic proximity of the combined company's fibre base and conversion facilities to optimize timber flows, and through marketing and logistics gains.

While some workforce reductions may occur as duplicative functions are combined,these represent only a small part of the expected synergies. This transaction is being
driven by the opportunities it presents to optimize assets and grow the company over time.

With the purchase of Weldwood, West Fraser will acquire:

- Four sawmills that are wholly-owned by Weldwood;
- Full ownership of one sawmill in which the company is currently a 50% joint
venture partner with Weldwood;
- Controlling interests in two other sawmills in which West Fraser and Weldwood
are joint-venture partners;
- Two plywood plants;
- One laminated veneer lumber (LVL) facility;
- One NBSK pulp mill in Hinton, Alberta, and 50% ownership in a second NBSK
mill in Quesnel, British Columbia; and
- 5.0 million cubic metres of Allowable Annual Cut (AAC), net of take-back, with licenses in both Alberta and British Columbia.

Weldwood has current capacity to produce approximately 1.3 billion board feet of lumber (on a two-shift basis), 600,000 metric tonnes of NBSK pulp, 495 million square feet of plywood (3/8"), and 3 million cubic feet of laminated veneer lumber. Approximately 61% of Weldwood's 5.0 million cubic metres of AAC is in Alberta, with the balance in British Columbia.

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West Fraser Ltd.

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