Pope and Talbot, which filed for bankruptcy a few months ago, announced today the sale of their pulp business for $225 million, which includes $100 million of value from working capital which is not included in the sale. So, their three pulp mills were sold for $125 million. On the one hand, this is slightly disappointing- these are high cost pulp mills and if they were shutdown, it would improve the supply/demand situation in the pulp market. But what is very interesting is the purchase price of $125 million.
Pope and Talbot's Pulp Business
819,000 tonnes NBSK pulp
EBITDA for 6 Months ending June 30, 2007 = $-9,527,000
Value = $125 million
SFK's NBSK Pulp Business
375,000 tonnes NBSK pulp
EBITDA for 9 months ended September 31, 2007 = $+35,940,000
Implied Value = ???
SFK has only 46% of the NBSK production of Pope and Talbot, but it is also significantly more profitable than Pope and Talbot. (Pope and Talbot is currently bleeding money) I had expected their pulp business to be near worthless, but the fact that it received such a large sum is encouraging. I don't know what valuation that implies for SFK's NBSK business, but it would begin with something like this:
Current Enterprise Value = 330 million
Working Capital - all other liabilities = 73 million
NBSK Pulp Mills = ???
RBK Pulp Mills = ???