Business

Tembec takeover under threat after two largest shareholders oppose deal

The takeover of forestry company Tembec appeared under threat after the company's second-largest shareholder said it will vote against the friendly offer by Rayonier Advanced Materials.

Rayonier Advanced Materials says it is standing by its bid for Tembec

The Tembec company logo is seen at its main office in Montreal in this May 2017 photo. (Paul Chiasson/Canadian Press)

The takeover of forestry company Tembec could be in jeopardy after the company's second-largest shareholder said Tuesday it will vote against the $807 million US friendly offer by Rayonier Advanced Materials.

Restructuring Capital Associates (RCA), which owns 17.1 per cent of Tembec's stock, said it will join Oaktree Capital Management in opposing the transaction at a vote July 27.

Together, the company's two largest shareholders control 37 per cent of Tembec shares.

The takeover requires support by a two-thirds majority vote of shareholders.

RCA said it supports the proposed merger with Rayonier Advanced Materials. But it added that the Florida company must respond more appropriately to several complaints from Oaktree including that shareholders aren't receiving a fair price and that Rayonier Advanced Materials can sweeten the offer. Rayonier Advanced Materials dismissed such concerns Monday as "misleading."

"The strategic merit of this unique combination can improve profitability exponentially and Oaktree makes a compelling case that Rayonier can and should improve its offer," RCA founder James Bennett said in a statement Tuesday.

A spokeswoman for Rayonier Advanced Materials and Tembec said the companies wouldn't comment on any particular shareholder's voting intentions before next week's vote.

On Monday, it said it stood by its offer of $4.05 in cash or 0.2302 of a share in Rayonier Advanced Materials, subject to a cap on the total amount of cash and shares that will be issued.

The friendly offer is 37 per cent above where Tembec's shares traded before the proposal, but it is less than the $4.26 the shares closed at on the Toronto Stock Exchange on Tuesday.

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