Louisiana-Pacific Corp. (LPX) agreed to buy Ainsworth Lumber Co. for about C$906 million ($863 million) to add Canadian output of oriented strand board, a plywood substitute, as it bets on growth in U.S. and Asian housing.
Louisiana-Pacific will pay about C$3.76 a share in cash and stock, the companies said yesterday in a statement. The deal’s value including assumed debt less Ainsworth’s estimated cash balance is about $1.1 billion. The per-share bid price is 30 percent more than Vancouver-based Ainsworth’s closing price in Toronto on Sept. 3.
The acquisition boosts Nashville, Tennessee-based Louisiana-Pacific’s exposure to a recovery in U.S. house-building and gives it greater access to Asian markets including Japan, Chief Executive Officer Curt Stevens said on a conference call. Construction spending in the U.S. increased in July to the highest level in four years, propelled by gains in residential real estate, the Commerce Department reported Sept. 3.
“If you look at the North American market, I think we are in pretty good shape” with this deal, Stevens said on the call. Ainsworth has two mills set up for products meeting Japanese specifications, which will help boost sales there, he said.
Louisiana-Pacific gained as much as 10 percent, the most on an intraday basis since November 2011, and was up 8.8 percent at $16.61 as of 9:35 a.m. today in New York. Ainsworth surged 30 percent to C$3.82 in Toronto. The takeover was announced after the close of regular trading yesterday.
The transaction is “strategically compelling,” Josh Zaret, a New York-based analyst at Longbow Research LLC, said today by telephone. “It extends Louisiana-Pacific’s leading market share to about 30 percent from about 20 percent, further consolidating the industry.”
Louisiana-Pacific makes construction materials including siding, sub-flooring and molding at plants in the U.S., Brazil, Chile and Canada, according to its website. Oriented strand board was the top contributor to revenue last year, accounting for 47 percent, according to data compiled by Bloomberg.
Private-equity funds managed by Brookfield Asset Management Inc., which own 54 percent of Ainsworth, agreed to support the deal, which is expected to close by the year-end. Louisiana-Pacific will fund the cash portion of the takeover through a combination of cash on the two companies’ balance sheets and new debt. BMO Capital Markets and Goldman Sachs Group Inc. agreed to provide a secured term loan.
The transaction was unanimously approved by the Ainsworth board and includes a C$32.5 million termination fee. It’s the largest deal in the wood building-product industry since Madison Dearborn Partners LLC bought Boise Cascade Co. from OfficeMax Inc. for $3.7 billion in 2004, according to data compiled by Bloomberg.
Louisiana-Pacific said on the call that it’s paying about 5.7 times Ainsworth’s earnings before interest, taxes, deprecation and amortization. The median Ebitda multiple paid in three comparable deals during the past 10 years was 3.6, according to the Bloomberg data.
Ainsworth’s access to Asian markets was a “pretty important” aspect of the deal, Stevens told reporters yesterday. Exports to Japan accounted for about 12 percent of Ainsworth’s shipments in the 12 months ended June 30, according to a presentation on Louisiana-Pacific’s website.
“Having a presence in Asia gives us a global reach which allows for geographic diversifications when local markets aren’t as active,” Stevens said. “We think as Asian markets continue to grow that we’ll have even more business over there.”
Louisiana-Pacific’s financial advisers are BMO and Goldman Sachs and its legal advisers are Jones Day LP, Stikeman Elliott LLP and Orrick Herrington & Sutcliffe LLP. Ainsworth’s financial adviser is RBC Capital Markets and its legal advisers are Goodmans LLP and Skadden Arps Slate Meagher & Flom LLP.
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