PORTLAND, Maine — Investors holding a majority stake in Canadian papermaker Catalyst Paper Corp. have agreed to a potential acquisition of the company by Kejriwal Group International, a move Catalyst said would mean new investment in its mills.
The Mumbai-based Kejriwal agreed to acquire the British Columbia-based Catalyst at a price of approximately $6 per share (Canadian), which sent Catalyst’s stock soaring to nearly $5 earlier this week.
Catalyst said in a news release about the letter of intent from Kejriwal that the deal “could provide the company with a significant amount of capital” to advance its planned growth strategies.
The proposed transaction would require Kejriwal to make $60 million in investments in the company, with $20 million invested on the closing of the deal, $5 million within six months after and $35 million within a year after closing.
In the proposed deal, Kejriwal would acquire Catalyst shares from four investors that together hold a 79 percent stake in the company.
The deal calls for the majority shareholders in Catalyst to negotiate exclusively with Kejirwal for 30 days to reach a sale agreement, according to a letter of intent filed with the U.S. Securities and Exchange Commission by investors Mudrick Capital Management, Oaktree Opportunities Fund IX, Cyrus Capital Partners and Stonehill Capital Management.
Catalyst acquired the mill in Rumford from Verso in January 2015 and since has retooled the mill’s business plan to include producing a ne w grade of uncoated freesheet paper on its No 12 machine, which it had shut down a year ago.
Catalyst said the agreement is still not a done deal.
“There can be no assurance that any definitive proposal will be made, that any agreement will be executed and on what terms, or that this or any other transaction will be approved or consummated,” the company said in a regulatory filing.
Kejriwal is the same company that had expressed interest in Verso’s Bucksport mill in January 2015, amid a legal challenge to Verso’s agreement to sell the mill to Canadian scrap metal company American Iron & Metal.
The company’s leader, Rahul Kejriwal, wrote a letter to U.S. District Court Judge John Woodcock in that case, stating his company is the largest manufacturer of recycled paper products and one of the largest makers of newsprint in Asia, with plans to buy coated and uncoated paper machines in North America.