Georgia-based RockTenn and Tacoma-based Simpson Lumber Company LLC announced on Monday an agreement that outlines how RockTenn will acquire the Simpson Tacoma Kraft Paper Mill located in Tacoma for approximately $343 million.
"This is exciting news for Tacoma Kraft employees and the community. The Tacoma Kraft Mill will be better positioned as part of RockTenn - a successful fiber-based company that is committed to the long-term success of the mill," said Allan Trinkwald, President of Simpson Lumber Co.
The purchase price reflects an "earnings before interest, taxes, depreciation, and amortization" multiple of less than six times based on the mill's financial results for the last year and the expected operating efficiencies, primarily due to the location of the mill on the West Coast. The transaction is structured as an asset purchase.
In 2013, the mill produced 465,000 tons on two paper machines and two pulp dryers that made various paper grades including containerboard, specialty kraft paper and pulp. The Tacoma Kraft Mill operates a 55-megawatt green biomass fuel cogeneration facility that was completed in 2009 and sells electricity under a long-term contract.
RockTenn has committed to invest $60 million in the mill during the next three years and has also entered into a 7-year wood chip supply contract with Simpson Lumber Company.
"The Tacoma Kraft Mill is a great strategic fit for RockTenn," said RockTenn's CEO Steve Voorhees. "Adding a West Coast mill will improve our ability to satisfy West Coast customers and generate significant operating efficiencies across our system."
The transaction is subject to customary closing conditions and regulatory approvals.
RockTenn is one of North America's leading integrated manufacturers of corrugated and consumer packaging. RockTenn's 26,000 employees work at operates locations in the United States, Canada, Mexico, Chile and Argentina.
Simpson's roots in the forest products business began in 1890. Simpson Lumber converts logs into lumber at production facilities in Tacoma, Shelton and Longview; as well as facilities in Georgia nad South Carolina. The company also has a subsidiary: Simpson Door Co. in McCleary.