Domtar ditches diapers for Containerboard

Fort Mill, South Carolina-based Domtar Corp. says it has entered into an agreement to sell its Personal Care business unit to New York-based American Industrial Partners (AIP) for $920 million. Domtar says the sale is a way of “reinforcing its focus on building an industry-leading paper, pulp, and packaging company.”

In a press release announcing the sale, Domtar refers to it as the “culmination of a process announced on Aug. 7, 2020, during which the company undertook a comprehensive strategic review of value-creating alternatives for the business.” The company’s Personal Care Unit focuses on “designing and manufacturing high-quality absorbent hygiene products for adults, babies, and children,” according to the Domtar website.

“The sale is an important component of our strategic plan and will provide us with additional capital and resources to strengthen and invest in the future of Domtar, leading to a more focused business portfolio,” says John D. Williams, president, and CEO of Domtar. “We are making solid progress with the conversion of the Kingsport, Tennessee mill, and are excited about the prospects for building a large, value-added packaging business. We expect construction to officially begin at Kingsport in the second quarter of 2021, setting the stage for the completion of North America’s premier lightweight containerboard facility, with the ability to produce and market approximately 600,000 tons of high-quality recycled linerboard and corrugated medium, by the end of 2022.”

Domtar, which also has an executive office in Montreal, says it is executing a strategic plan to enter the containerboard market “with highly competitive assets and a differentiated go-to-market strategy.” The Kingsport conversion provides the company with what it calls “a strategic entry point” to build up to 2.5 million tons-per-year business and become a long-term strategic supplier to the packaging industry.

The company says its containerboard growth plans will coincide with maintaining what it calls “secure and stable cash flow” through its paper and pulp businesses. Domtar makes office, printing, and specialty paper at what it calls low-cost mills that generate “attractive returns even in the most challenging environments.” The company says it intends to continue to produce pulp focused on “segments with the highest growth profiles, including the hygiene, tissue and towel markets.”

Morgan Stanley & Co. is acting as financial advisor and New York-based Debevoise & Plimpton LLP as legal advisor to Domtar. Deutsche Bank Securities Inc. and Barclays are acting as financial advisors and Ropes & Gray LLP and Baker Botts LLP are acting as legal advisors to AIP.