Domtar shareholders OK reverse split to boost share price
Domtar shareholders endorsed a reverse share split Friday to help the forestry company preserve its exchange listings and attract new investors.
More than 82 per cent of votes cast at the company's annual meeting in Montreal, and 68 per cent of the 495 million total outstanding shares, authorized the board of directors to proceed with the move.
The board subsequently met to consider the split ratio. Options included splits of one share for 12, 15 or 18 shares. The company will likely announce the split ratio and effective date on Monday.
Domtar's goal is to maintain the share price above the $1 US threshold set by the New York Stock Exchange to allow trading.
On Friday, Domtar shares closed down 18 cents to $1.33 on the TSX and lost 24 cents to $1.14 US on the NYSE. They have fallen as low as 51 cents US on the NYSE during the past year.
The reverse split should also make the shares more attractive to a broader range of institutional and other investors, since many brokerage houses have internal policies to avoid low-priced stocks.
Domtar CEO John Williams said the company hopes shares will rise above the $5 minimum many investors require before considering a company.
Williams warned shareholders that the paper industry faces another tough year in 2009 after enduring lower demand and operating profitability in 2008.
North American paper demand continues to drop but has levelled off from the sudden drop last November.
"We believe that demand will not recover completely, but will decline at a much slower pace in a better economic environment," Williams said at his first annual meeting since becoming CEO in January.