Insights

Why Resolute Forest Products Stock Skyrocketed Today

What happened

Shares of Resolute Forest Products (NYSE: RFP) soared on Wednesday after the forest products leader struck a deal to be acquired by pulp and paper giant the Paper Excellence Group. As of 2:50 p.m. ET, Resolute’s stock price was up more than 60%.

So what

Under the terms of the agreement, Resolute’s shareholders would receive $20.50 per share in cash for each share they own. That represents a premium of roughly 64% to the stock’s closing price on Tuesday. The deal values the company at about $2.7 billion.

Resolute’s stock owners would also receive contingent rights to the expected recovery of approximately $500 million of softwood lumber duty deposits through the second quarter.

The Paper Excellence Group intends to merge Resolute with a newly formed subsidiary of its Domtar packaging business. The combination would help to further diversify the company’s operations and advance its expansion plans.

“After the close of the transaction, the Paper Excellence Group will own or operate a collection of diverse, strategic assets across North America that allows us to deliver a wider range of high-quality products to our customers,” Domtar CEO John Williams said in a press release. 

Now what

Privately held the Paper Excellence Group owns a broad array of pulp and paper manufacturing operations across the Americas and Europe. Adding Resolute would strengthen its North American production network at a time when rising e-commerce sales are boosting demand for packaging solutions. 

“Resolute is an ideal fit for our long-term growth strategy,” Paper Excellence Group chief strategy officer Patrick Loulou said. “It complements our existing pulp, paper, and packaging businesses and adds capabilities in lumber and tissue.”

The merger is expected to close in the first half of 2023, subject to shareholder and regulatory approval.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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