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Kamloops pulp mill must be sold to third party as part of Domtar/Paper Excellence merger

That is the condition set by the Competition Bureau of Canada in approving the US$3 billion deal
Domtar pulp mill
The Domtar pulp mill is on Mission Flats Road in Kamloops.

While the merger of Domtar and Paper Excellence has been approved by the Competition Bureau of Canada, part of the approval means the Kamloops pulp mill must be sold to a third party.

On May 11, 2021, Paper Excellence and Domtar, based in Montreal and Fort Mill, S.C., reached an agreement for Richmond-based Paper Excellence to purchase Domtar for $55.50 per share, a deal worth about $3 billion in United States currency.

The merger agreement had a provision that limited the obligation to divest assets to no greater than 410,000 dried metric tons of softwood kraft pulp. The Domtar pulp mill in kamloops has 408,000 tons of production and is the company’s only kraft pulp mill in B.C. that is part of the deal.

The Competition Bureau of Canada has concluded that the merger would likely lessen competition substantially for the purchase of wood fibre — a key input in the manufacture of pulp — from the Thompson/Okanagan region.

As a result, the bureau has determined the proposed transaction is anti-competitive because it would enable Paper Excellence to pay lower than competitive prices to sawmills and other suppliers of wood fibre in a region where Paper Excellence already has a high concentration of pulp mills.

To resolve the bureau's concerns, Paper Excellence has agreed to sell Domtar's Kamloops pulp mill following its acquisition.

The bureau said the sale will be made to an independent purchaser to be approved by the Commissioner of Competition.

The pulp mill on Mission Flats Road is one of the city’s largest employers and taxpayer. It employs about 350 people and pays property taxes of approximately $5 million annually.