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EACOM Acquires Domtar’s Forest Products Business

Montreal, Quebec, Canada, 01 July 2010 -- /PRNewswire/ -- Domtar Corporation (NYSE/TSX: UFS) is pleased to announce the closing of its previously announced transaction to sell its Forest Products Business to EACOM Timber Corporation (TSX-V: ETR). EACOM acquired the business for CAD 80 million plus elements of working capital of approximately CAD 46.5 million. Domtar received 19% of the proceeds in shares of EACOM, resulting in an ownership interest of approximately 11.74%.

The transaction includes five operating sawmills: Timmins, Nairn Centre, and Gogama in Ontario, and Val-d'Or and Matagami in Quebec; plus two nonoperating sawmills: Ear Falls in Ontario and Ste-Marie in Quebec. The sawmills have approximately 3.5 million cubic meters of annual harvesting rights and a production capacity of close to 900 million board feet. Also included in the transaction is the Sullivan remanufacturing facility in Quebec and Domtar's interests in two investments: Anthony-Domtar Inc. and Elk Lake planing mill Limited.

The consideration paid to Domtar is comprised of approximately CAD 102 million in cash and 48,070,712 common shares of EACOM valued at approximately CAD 27 million, based on the 30 June closing price for EACOM shares. 

As part of the transaction, Domtar Corporation has selected Patrick Loulou, senior vice-president of Corporate Development, Domtar Corporation, to be a director on EACOM’s board. EACOM intends to confirm this appointment at its board meeting on 05 July 2010.

“We are very proud of this acquisition as it allows us to continue to pursue our vision to become a leading producer of softwood lumber for global markets,” stated Rick Doman, President and Chief Executive Officer of EACOM Timber Corporation. “We are aware that customers in the wood products sector have many producers to choose from, and we will work very hard to ensure they do business with us, particularly given our ongoing commitment to our FSC certification,” he continued. 

In conjunction with the closing of the transaction, EACOM issued 48,070,712 common shares to Domtar Inc., as partial consideration for the sale by Domtar Inc. and Domtar Pulp and Paper Products Inc., both wholly-owned subsidiaries of Domtar Corporation, of their Forest Products Business pursuant to an asset purchase agreement entered into as at 26 March 2010. The details of the subject transaction are fully disclosed in a Material Change Report dated 06 April 2010, filed by EACOM on SEDAR, and further information on this transaction will be the subject of an Early Warning Report to be filed on Domtar Inc. on SEDAR. Such acquisition of EACOM's common shares represents approximately 11.74% of the 409,566,056 common shares of EACOM outstanding on 30 June 2010, based on information provided to Domtar Inc. No shares were issued to Domtar Pulp and Paper Products Inc. Before 30 June, 2010 Domtar Inc. did not own nor control shares of EACOM.

The transaction occurred by way of private placement of common shares from treasury of EACOM. EACOM's common shares are listed and traded on the TSX Venture Exchange. The value was established at CAD 0.50 per common share in the asset purchase agreement.

EACOM raised CAD 145 million in March 2010 on a private placement subscription receipt financing. Canaccord Genuity Corp. (formerly Cannacord Financial Ltd. and Genuity Capital Markets G.P.) acted as agent on the financing. The financing was completed at CAD 0.50 per subscription receipt. The subscription receipts have now converted into common shares of EACOM on a one for one basis. The subscription receipt proceeds were held in escrow pending the completion of the transaction and were released to fund the acquisition price and general working capital.  The agent received a cash commission of 6% of the proceeds and agent’s warrants to acquire 17,400,000 common shares (6% of the common shares issued under the subscription receipts) at a price of CAD 0.50 per share. The agent’s warrants expire in two years. 

In its financial statements for the quarter ended 30 June 2010 Domtar will record a charge of approximately CAD 37 million related mainly to the loss on disposal of the Forest Products Business and related pension curtailments. Domtar will incur further charges of CAD 15-20 million in future periods related to pension settlements resulting from the transaction.

About Domtar

Domtar Corporation (NYSE/TSX:UFS) is the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second largest in the world based on production capacity. It also manufactures papergrade, fluff, and specialty pulp. The company designs, manufactures, markets, and distributes a wide range of business, commercial printing, publishing, converting, and specialty papers. Domtar owns and operates Domtar Distribution Group, an extensive network of strategically located paper distribution facilities. The company employs more than 9000 people. To learn more, visit www.domtar.com.

About EACOM Timber Corporation

EACOM Timber Corporation is a TSX-V listed company. EACOM is now one of the largest softwood producers in eastern Canada, and has re-established its head office in Montreal, Quebec. The company is a stand-alone operation dedicated to the manufacturing of solid wood and value-added products. Before acquiring the Domatar business, EACOM owned one idle mill in Big River, Saskatchewan, which it acquired at the beginning of 2010.


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