Canada-based packaging and tissue company Cascades has announced it has agreed to purchase the assets of Orchids Paper Products Co. for $207 million.
Orchids, which has been headquartered in Brentwood for the last two years, has faced financial difficulties since 2016, when the company encountered what it deemed were unprecedented input costs, competition and construction costs.
After struggling to refinance its debt or to find a buyer, Orchids announced in April it had initiated Chapter 11 proceedings in U.S. Bankruptcy Court and filed a bid procedures and sale motion (read here). Private equity firm Black Diamond Capital Management and Brant Paper Investment Co., which are both based in Connecticut, had been slated to take control of Orchids. But Cascades said in late June that it had won the auction related to Orchids’ assets and on July 1 announced a Delaware bankruptcy court approved the sale.
As part of the deal, Cascades will acquire the Orchids production plants located in Barnwell, South Carolina, and Pryor, Oklahoma, as well as commercial arrangements that Orchids had with Mexico-based Fabrica de Papel San Francisco, among other assets. Cascades anticipates that, beginning in 2021, the assets will generate $45 million in pre-tax earnings.
Cascades said it will spend $55 million in the coming months to transfer its currently outsourced production volume to the two Orchids plants.
“This acquisition is very well aligned with our strategic plan and supports our efforts to position our tissue platform for long-term growth,” Mario Plourde, Cascades CEO, said in the release. “The acquisition of these well-funded assets enables us to do so while simultaneously supporting market consolidation and avoiding the risks inherent in the construction or installation of new equipment.”
It is unclear what the acquisition will mean for the Orchids Brentwood headquarters, as company officials could not be reached comment.
Cascades bill itself as the fourth largest tissue paper manufacturer in North America, employing 2,200 people at its 21 manufacturing plants in Canada and the United States.