Brookfield Asset Management’s Can$3.6 billion in timber asset sales helped push forestry to the forefront of Canadian mergers and acquisitions in the second quarter. Source: Vancouver Sun
But the development has as much to do with overall weakness in the market for corporate capital as it does forestry’s rebound.
Brookfield sold Longview Timber LLC, which holds 260,000 hectares of forest land in Washington and Oregon, to Weyerhaeuser for Can$2.65 billion, making it the second-biggest buy in the quarter behind grocery chain Sobeys’ $5.8-billion bid for Canada Safeway.
And Brookfield’s Can$1.03-billion sale of Longview-Washington-based Longview Fibre Paper and Packaging to KapStone Kraft Paper placed 10th on the big-deals list, which topped out at 627 deals worth Can$38.9 billion, compared with an anemic Can$24 billion worth of deals in the first quarter.
Those deals reflect increasing strength in the forest-products market, which is underpinned by the continuing recovery of US housing starts, said Jason Boyer, vice-president with PwC’s deals group in Vancouver.
“We’ve had, obviously, an upturn in the sector over the last couple of years, so we’re back to levels in the industry we haven’t had since 2007- 08,” Boyer said.
The Brookfield deals in particular reflected the company’s ability to capitalize on favourable industry conditions to sell off investments that they made in Longview in 2007.
However, Boyer added that other Canadian companies are in better position to contemplate buying mills and other assets.
Canfor on Friday reported a Can$110.3-million net profit attributable to shareholders for the second quarter, compared with Can $2.6 million in the same quarter a year ago.
Last week, West Fraser Timber reported a second-quarter profit of Can$109 million, compared with Can$24 million a year ago.
“So you’ve got a financial health there on the back of the ramp-up of production,” Boyer said. However, the industry still faces some uncertainty related to whether the US housing recovery will continue to build strength and concerns over how much the Chinese economy is going to slow down.
Mining, on the other hand, is suffering through a downturn in commodity prices that has caused the appetite for acquisitions to disappear.
There were no major deals in mining during the quarter, according to the PwC report, with activity in the sector adding up to Can$750 million for the quarter – just 1.9% of the total. Deals in the forestry sector accounted for 12% of the total value.
