By Ketki Saxena
Investing.com -- West Fraser Timber (TSX:WFG) Co. Ltd has announced that it will sell its unbleached softwood kraft pulp mill located in Hinton, Alta., to Mondi (LON:MNDI) Group, an integrated packaging and paper company for US$5 million.
Mondi has also announced that it plans to invest an additional 400 million euros into expanding this newly acquired facility.
A crucial part of their expansion strategy involves installing a new kraft paper machine that would be capable of producing 200,000 tonnes per year. According to Mondi's projections, this addition is expected to become operational by late 2027.
Despite the sale, West Fraser will continue its association with the Hinton mill, agreeing to supply fibre under a long-term contract even post-sale.
Commenting on the acquisition, Andrew King, Mondi Group CEO, said: "Strategically, we are focused on investing to support the growing market demand for our sustainable packaging products, while delivering attractive mid-teen returns through cycle. The acquisition of Hinton is an excellent opportunity for us to secure locally produced kraft paper for our bags customers, helping to meet the current and anticipated future growth in demand for industrial and mailer bags in the Americas. This acquisition will also enable us to further strengthen our position as the global market leader in the production of kraft paper and paper bags."
This high-profile sale still awaits regulatory approval before it can be finalized completely. However, both parties expect that all formalities should wrap up towards this year-end.