Mercer International Inc. said in November it would acquire the 430,000-tonnecapacity Celgar Pulp Co.’s NBSK pulp mill in Castlegar, BC. The purchase price, excluding an amount for defined working capital on closing, is $210 million composed of $170 million cash and $40 million in Mercer shares.

Mercer said the acquisition would make it the world’s largest publicly traded market producer of NBSK pulp with an annual production capacity of about 1.3 million tonnes when combined with its two mills in Germany.

At the time, Mercer still needed to secure satisfactory financing and closing occurring on or before February 28, 2005 with an extension available under certain circumstances.

The Celgar mill underwent a $C850-million modernization program in 1993 – it was the first inland sulfate pulp mill in BC, having been built by Celanese Corp. of America in 1959. It produces two grades of pulp, Celstar and Celect, both produced from softwood blends. The continuous process mill has modern power generation and environmental treatment facilities.  There are fiber supply arrangements with regional sawmills. The workforce has a five-year collective bargaining agreement.

The rebuild was done while the mill was owned indirectly by Stone Container Corp. and a Venezuelan affiliate. Cost overruns and indebtedness forced it into bankruptcy in 1998. Subsequently, the Celgar mill’s two senior secured lenders – the Royal Bank of Canada and National Westminster Bank of England — appointed KPMG Inc. to operate the mill as a receiver and trustee, which it has done since 1998. In 2000, Asia Pulp and Paper was rumored to have bought the mill.

Mercer, with headquarters in Seattle, WA, and originally based in Vancouver, BC — is now a European pulp and paper manufacturing company whose two modern NBSK pulp mills in Germany have an aggregate capacity of some 862,000 tonnes/year. In Mercer’s view, the Celgar mill represents operations with similar underlying profit potential and low maintenance capital requirements as its German mills in Rosenthal and Stendal, the latter having started up in September. www.mercerinternational.com. www.castlegar.com/celgar.

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