12. Acquisition of Tembec Assets
On March 23, 2012, the Company completed the acquisition of Tembec's southern British Columbia Interior wood products assets for cash consideration of $65.6 million, including a payment on account of net working capital, excluding certain liabilities retained by Tembec. The acquisition was accounted for in accordance with IFRS 3 Business Combinations.
The acquisition included Tembec's Elko and Canal Flats sawmills and approximately 1.1 million cubic metres of combined Crown, private land and contract annual allowable cut. The transaction also included a long-term agreement to provide residual fibre supply for Tembec's Skookumchuck pulp mill. The assets acquired increased the Company's fibre availability and production capacity.
The following summarizes the recognized amounts of assets acquired and liabilities assumed at the acquisition date:
(millions of Canadian dollars)--------------------------------------------------------------------------Land $ 3.0Buildings, equipment and mobile 6.5Timber licenses 43.5Deferred reforestation obligations (16.5)Non-cash working capital, net 29.1--------------------------------------------------------------------------Total net identifiable assets $ 65.6----------------------------------------------------------------------------------------------------------------------------------------------------
If the acquisition had occurred on January 1, 2012, consolidated 2012 sales would have increased by approximately $37.0 million, with no material change to consolidated income. In determining these amounts, the fair value adjustments that arose on the acquisition date have been assumed to be the same as if the acquisition had occurred on January 1, 2012.
The Company incurred acquisition-related costs of $1.3 million, principally relating to external legal fees and due diligence costs, which were included in selling and administration costs, and severance costs of $2.5 million related to restructuring of the acquired assets. These amounts are recorded in the Company's consolidated statement of income (loss) for the three months ended March 31, 2012.
13. Share Exchange
On March 2, 2012, Canadian Forest Products Ltd. ("CFP"), a wholly owned subsidiary of Canfor, acquired 35,776,483 common shares of Canfor Pulp Products Inc. ("CPPI") in exchange for its 35,776,483 Class B Exchangeable LP Units of CPLP and 35,776,483 common shares of Canfor Pulp Holding Inc. ("Canfor Holding"), pursuant to the terms of an Exchange Agreement made as of January 1, 2011 among CFP, CPPI, Canfor Holding and CPLP.
As of the date of exchange, the Company consolidated the balances of CPPI and Canfor Holding, including an additional deferred income tax liability of $31.4 million and cash of $6.8 million. The non-controlling interest in consolidated equity increased by $25.0 million on the date of exchange, representing the additional non-controlling interest balances in CPPI and Canfor Holding.
Prior to the share exchange, CFP and CPPI entered into a one-time dividend waiver agreement, waiving CFP's right to the first $7.8 million of future dividends declared by CPPI. As such, $7.8 million was included in non-controlling interests to account for future distributions which the Company had waived its entitlement to. The full $7.8 million dividend was paid by CPPI during the second quarter of 2012.
