Tembec Inc‘s largest shareholder, Oaktree Capital Management LP, asked other shareholders to reject Rayonier Advanced Materials Inc‘s deal to buy the Canadian paper and cellulose pulp maker, saying it was a “flawed” sale process.
Oaktree, which owns a 19.9 percent stake in Montréal-based Tembec, said on Monday there is a significant value gap between Rayonier’s offer price and the “real value” of Tembec.
Rayonier, which makes high-value cellulose specialties fibres, said in May it would buy Tembec for US$807 million to expand into packaging and forest products.
Oaktree said Tembec’s board claimed the support of Fairfax Financial Holdings, which then held a 19.99 percent stake in Tembec. Fairfax sold off its entire stake in June. Fairfax still has voting rights but no economic interest in Tembec, and this makes it unfair to shareholders that Fairfax’s “empty votes” should determine Tembec’s future course, Oaktree said.
Rayonier and Tembec were not immediately available for comment outside regular business hours.
Oaktree, which last week decided to vote against the transaction, said the deal in its current form is unlikely to close, and that it had received “significant” shareholder support since announcing its opposition.
Terming Tembec’s claim that the deal was the result of a comprehensive sale process as “misleading,” Oaktree said Tembec was relying on an “apples-to-oranges comparison.”
Oaktree accused Tembec’s board of conducting a “piecemeal process” over a number of years by offering some or all of Tembec assets at different times, creating confusion among buyers. It also termed Rayonier’s offer as “unsolicited” and “opportunistic” and not being part of any formal sale process, and questioned the timing of the sale when Tembec’s business was improving.
Tembec can generate more shareholder value as a stand-alone entity, Oaktree said.
Update: Based in Los Angeles, Oaktree is an alternative investment firm with a specialization in distressed debt and other credit strategies.
Oaktree’s other Canadian investments include specialty foods producer SunOpta Inc.
(Reporting by Sangameswaran S in Bengaluru; Editing by Gopakumar Warrier)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
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