Louisiana-Pacific Corporation (LPX - Snapshot Report), the leading manufacturer of homebuilding products, recently completed the acquisition of Canfor Corporation’s 50% share in the Peace Valley Oriented Strand Board (OSB) mill, which both the companies jointly owned. Louisiana paid about $77 million for Canfor’s share and has now become the sole owner of Peace Valley. Canfor may receive further payment over a three-year period based on Peace Valley OSB’s trailing 12-month earnings, before, interest, taxes, depreciation and amortization (EBITDA).
The Peace Valley mill is located in Fort St. John, British Columbia. As part of their joint ownership, Canfor provided labor, raw materials and administrative services and Louisiana gave operational support. The facility can manufacture up to 820 million square feet of OSB. The OSB products are sold under the LP brand name. Following the acquisition, Canfor will continue to provide raw materials to Peace Valley.
The Peace Valley acquisition will strengthen Louisiana’s OSB segment, which manufactures and distributes OSB structural panel products. It will increase the production capacity of the segment, thus improving its ability to benefit from the improving demand for OSB products driven by improving housing market.
Sales in the segment grew 92.6% to $287 million in the first quarter of 2013 owing to an increase in pricing. The improved housing start driven by growing momentum of the housing market recovery, led to increase in volume in the segment.
Louisiana-Pacific is optimistic about the housing market recovery and believes that the company is well prepared to meet the additional demand.
Louisiana-Pacific carries a Zacks Rank #2 (Buy).
Some other companies that are doing well and deserve a mention include Potlatch Corporation (PCH - Snapshot Report), Weyerhaeuser Co. (WY - Analyst Report) and Universal Forest Products Inc. (UFPI - Analyst Report). Potlatch Corporation carries a Zacks Rank #1 (Strong Buy) whereas Weyerhaeuser and Universal Forest Products carry a Zacks Rank #2 (Buy).