Vancouver-based forestry company Conifex Timber Inc. (TSX-V: CFF) this morning announced plans to acquire Welco Lumber Corp.’s commodity lumber distribution business, as well as the transportation and logistics business of Welco subsidiary Navcor Transportation Services Inc.
Conifex has entered into a non-binding letter of intent (LOI) to acquire the two business streams.
Private companies Welco and Navcor have provided lumber marketing and logistics services to Conifex via a contract basis since March 2009, when Conifex started production at its Fort St. James sawmill.
Under the terms of the LOI, Conifex would purchase all assets related to the Welco’s lumber distribution business and assume existing office lease and employment agreements with key employees. Conifex intends to operate the lumber distribution business under a newly formed company and maintain previously established trading relationships.
The LOI provides that Conifex will acquire all of the issued and outstanding shares of Navcor upon closing.
Under the terms of the proposed transaction, Conifex would pay $1.525 million to Welco plus certain commissions to Welco for three years after closing.
“The team proposed to come over to Conifex have done a superb job arranging product sales and deliveries to the three largest softwood lumber import markets in the world – the U.S., China and Japan,” Conifex CEO Ken Shields said in a press release.
“We are pleased that the proposed transaction will enable us to serve our customers with the team they know and respect.”
The transaction is expected to close by December 31.
In late August, Conifex posted a $3.6 million loss on $26.9 million in revenue for its second quarter of the year. (See “Conifex ships vast majority of lumber to China”– BIV Business Today, August 19.)
Jenny Wagler
Twitter: JennyWagler_BIV