West Fraser Timber (WFG) announced Tuesday that it has signed a deal to acquire Georgia Pacific’s oriented strand board (OSB) mill near Allendale, South Carolina, for around $280 million.
The company says the plant will give it the flexibility to better meet customer demand, especially in the Southeastern United States.
The plant, which started producing OSB in 2007, has been inactive since the end of 2019, and has an estimated stated capacity of approximately 760 million square feet.
West Fraser said it plans to spend around $70 million to modernize and optimize the plant in preparation for the restart, which is expected to be within nine months of the acquisition closing based on current demand conditions. The site is expected to employ around 135 people.
West Fraser president and CEO Ray Ferris said, “We look forward to acquiring and upgrading the Allendale mill to make it another component of West Fraser’s low-cost production portfolio.
“Further, the additional production capability will provide greater operational flexibility across our OSB mill portfolio to meet demand growth for our engineered wood products, including for our specialty and value-added products.”
The transaction is expected to close after the successful completion of U.S. regulatory reviews, and the satisfaction of customary conditions.
Management will provide an update and further details on the transaction during West Fraser’s third-quarter earnings call on October 28, 2021. (See Insiders’ Hot Stocks on TipRanks)
On October 25, TD Securities analyst Sean Steuart reiterated a Buy rating on WFG with a C$110 price target. This implies 6.6% upside potential.
Overall, consensus among Wall Street analysts is that WFG is a Strong Buy based on four Buys and one Hold. The average West Fraser Timber Co price target of C$149.39 implies 44.8% upside potential to current levels.
TipRanks’ Smart Score
WFG scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock returns are very likely to beat the overall market.
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