Chemtrade Acquires Sodium Chlorate Business

04 August 2003 00:00  [Source: ICB Americas]

Canadian sulfuric acid producer Chemtrade Logistics Income Fund has agreed to buy B.C. Chemi-cals Ltd. (BCC), a business unit of lumber and pulp producer Canadian Forest Products Ltd. (Canfor), for C$117.3 million (about $85 million). BCC is the sole supplier of sodium chlorate to Canfor's Prince George, British Columbia, pulp and paper mills, as well as a supplier to third parties under multiyear contracts. The acquisition is expected to be completed by the end of this month.

Under terms of the deal, Canfor will purchase the bulk of BCC's sodium chlorate output and pay a fee for processing the soap skimmings from Canfor's pulp mills into crude tall oil for the next 10 years. Sodium chlorate, which is used as a bleaching agent in pulp production, is BCC's primary business, although crude tall oil production comprises a small part. According to Chemtrade, crude tall oil is used as an alternative fuel to natural gas, "but more importantly, permits mills providing the feedstock to operate at higher capacity."

The acquisition will "expand and diversify" Chemtrade's operations "on a product, geographic and customer basis, improving the stability of its earnings stream." Chemtrade, which is listed on the Toronto Stock Exchange, produces four sulfur-related products and is the largest producer of sodium hydrosulfite (SHS) in North America. Last year, the company bought Clari-ant's North American SHS business.

For the six months that ended June 30, the BCC business generated revenues of roughly C$24.9 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of C$10.1 million, the company says.

In other sodium chlorate market news, Calgary, Canada-based Nexen Chemicals plans to expand capacity at its Brandon, Manitoba, Canada, sodium chlorate facility by 33 percent, to 260,000 tons per year. Nexen expects the new capacity to start operations during the fourth quarter of 2004, subject to regulatory approvals.

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