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Domtar Slips 5% On Personal Care Unit Sale Deal

Shares of Domtar Corp. fell 5.1% on Friday after the paper mill firm introduced the divestiture of its private care enterprise to private-equity agency American Industrial Companions for $920 million.

Domtar (UFS) mentioned that it expects the deal to be accomplished by the top of the primary quarter. In the meantime, the sale proceeds will probably be used to repay $600 million in debt and to repurchase shares value $300 million. The corporate’s CEO John D. Williams mentioned that the enterprise unit sale would maximize shareholders’ worth, strengthen its stability sheet, and enhance its liquidity place.

The transfer to promote its private care enterprise got here after the corporate started a strategic evaluation of its enterprise in Aug. 2020. The corporate is specializing in its core paper, pulp, and packaging enterprise. Furthermore, Domtar can also be planning to enter the containerboard market. (See UFS stock analysis on TipRanks).

Following the announcement, KeyBanc analyst Adam Josephson maintained a Maintain ranking on the inventory. Josephson mentioned, “The sale value/a number of had been beneath preliminary consensus expectations from the most effective we will collect, however as the method dragged on, we expect expectations had come down.”

The analyst added, “Domtar is now a pure-play pulp & paper firm, and expects to turn out to be a large N.A. containerboard producer within the years to come back; the Firm can have extra monetary flexibility to take action following this sale.”

General, the consensus amongst analysts is a Maintain with 6 Holds and just one Purchase. The common price target of $30.80 means that Domtar shares have a draw back potential of round 6.2% over the subsequent 12 months. Shares declined 8.3% over the previous 12 months.

UFS

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