Cascades wins bid for Orchids Paper Products

Cascades, Kingsey Falls, Ontario, has entered into a definitive agreement to acquire assets from Orchids Paper Products, Pryor, Oklahoma, following the approval thereof by the United States Bankruptcy Court for the District of Delaware (subject to completion of definitive documentation). The company will pay a cash consideration of $207 million, financed by its credit facilities, Cascades reports in a news release announcing the acquisition. Cascades is a leader in the recovery and manufacturing of packaging and tissue products. 

The assets to be acquired include Orchids Paper Products’ Barnwell, South Carolina, and Pryor, Oklahoma, operations, as well as certain assets, the supply and other commercial agreements with Fabrica de Papel San Francisco S.A., Mexicali, Mexico, and certain affiliates to that operation. Cascades reports that this transaction is expected to close in August or September, subject to the satisfaction of customary closing conditions.

The acquired assets are expected to generate annual earnings before interest, tax, depreciation and amortization (EBITDA) of approximately $45 million beginning in 2021, implying an acquisition multiple of approximately five times, driven by the maximization of capacity utilization of the acquired facilities, company asset rationalization and important reductions of corporate, subcontracting and logistics costs, Cascades reports in a news release.

Orchids Paper’s integrated plants have an estimated parent roll capacity of up to 114,000 tons and up to an estimated 114,500 tons of converting capacity. Orchids Paper also has an agreement with Fabrica to provide access for up to an additional 20,000 tons of converted products for the Western U.S. market, according to a news release from Cascades. More than $240 million has been invested in the plants’ strategic partnership, modern production and converting equipment over the last five years. In the coming months, Cascades plans to invest about $5 million to add swing functionality to expand the range of products that can be manufactured from ultra-premium structured tissue to high-quality conventional.

The acquisition accelerates the modernization of Cascades’ U.S. tissue platform while strengthening the geographic and operational positioning of the company's retail tissue segment in the Southern and Western U.S. In the coming months, Cascades will maximize the profitability of the Barnwell and Pryor plants, which operated at approximately 30 percent and 70 percent of their total converting capacity in 2018, by transferring volumes that are currently outsourced to third parties or produced at the Company's other U.S. plants to these facilities. The operational optimization of the new assets, lower transportation and subcontracting costs, reduction of Orchids Paper’s corporate costs, and the rationalization of Cascades’ current platform are expected to generate full-year annual EBITDA run-rate of approximately $45 million beginning in 2021.