West Fraser to Acquire Norbord, Creating a Diversified Global Wood Products Leader

Industry News

- Complementary OSB business expands product and geographic diversity
- Greater scale and customer relevance unlocks and de-risks growth opportunities
- West Fraser and Norbord shareholders to benefit from a stronger value creation platform
- Joint investment community conference call today at 7:00 a.m. PT / 10:00 a.m. ET

VANCOUVER, BC and TORONTO, ON, Nov. 19, 2020 - West Fraser Timber Co. Ltd. ("West Fraser") (TSX: WFT) and Norbord Inc. ("Norbord") (TSX: OSB) (NYSE: OSB) today announced that they have entered into a strategic business combination pursuant to which West Fraser, a leading North American diversified wood products company will acquire all of the outstanding common shares of Norbord, the world's largest OSB producer, in an all-stock transaction valued at approximately C$4.0 billion (US $3.1 billion) (the "Transaction"). Following closing, the combined company will operate as West Fraser.

With a complementary range of products, increased scale, and greater geographic and end-market diversification, West Fraser will be a global wood products leader, with established and growing positions in both North America and Europe. With low cost and profitable operations in complementary sectors, West Fraser is expected to generate more stable and resilient earnings through the cycle, with a best-in-class platform for future growth and value enhancement. At the close of this Transaction, West Fraser will be a top global producer of both lumber and OSB.

“Norbord’s OSB production is a perfect complement to the West Fraserportfolio, enabling us to deliver a wider range of wood products, and making us a more complete, efficient and valuable partner for our customers,” said Raymond Ferris, President and Chief Executive Officer of West Fraser. “Norbordis the largestglobal OSB producer witha well-earned reputation for cost and margin performance, and for expanding the use of OSB in new applications and industries. The Norbordbusiness will also bring additional geographic diversity, and an expanded opportunity set, from its well-establishedpositions in the United Kingdom and Western Europe. This Transaction gives us additional financial flexibility to pursue strategic growth opportunities, and better positions our company to deliver value to shareholders through the cycle. Our companies have complementary operating cultures, with a common priority on safety, sustainabilityand cost management, and we are thrilled to welcome Norbord’s talented employees to West Fraser. We look forward to drawing from best practices across the operations as wepursue the significant strategic opportunities this Transaction will unlock.”

“This Transaction recognizes Norbord’s global OSB positionand is a very exciting opportunity for our customers, our employeesand our shareholders,” said Peter Wijnbergen, President and Chief Executive Officer of Norbord. “Joining West Fraserwill allow us to expand our profile with our core new homeconstruction customers, and provides a stronger platform to pursue our industrialOSB products strategy. Norbordshareholders will have meaningful participation in a more diversified and resilient wood products leader with a superior ability to accelerate growth, and an impressive track record of cost leadership, margin performance, and shareholder returns. For our team, this will provide expanded opportunities as part of a larger company with common values and a shared priority on safety. Our Board and executive team have greatrespect for West Fraser, and we look forward to being a part of a much broaderbusiness withthe West Fraserteam.”

The companies have entered into a definitive agreement pursuant to which West Fraserwill acquire all of the shares of Norbord. Norbord shareholders will receive 0.675of a West Fraser sharefor each Norbord share, which equates to C$49.35 (US$37.78)per Norbordcommon share, based on 2the closing price of West Frasercommon shares on November 18, 2020.This represents a 13.6% premium to the closing price of Norbord’s shares on the TSX on November 18, 2020, and a premium of 8.0% based on the 10 day volume weighted average trading prices of both companies.Upon closingcurrent West Frasershareholders will own approximately 56% of the company, with current Norbordshareholders owning approximately 44%.

A Diversified Global Wood Products Leader

This Transaction firmly establishes West Fraseras a leader in the global wood products industry, with a greater platform for shareholder value creation founded on a premierproduct mix, strong balance sheet, and enhanced scale and diversity.

  • Expanded, higher value, customer relationships–with a combined home and building construction product offering that includes a wide range of lumber and OSB panel applications, as well as other engineered wood products, the combined company is more relevant, efficient and valuable for its principal pro-dealer, homebuilder, and building construction customer segments.
  • Unlocks and de-risks strategic growth potential–the combined business will have the operational platform and financial capacityto accelerate growth in the North American lumber and industrial panels segments, as well as in both lumber and OSB in Europe.
  • Expanded product portfolio and additional operating talent –the Transaction adds a strong cash flow generating OSB business to West Fraser’s existing portfolio. As complementary businesses producing and selling distinct products, West Fraserintends to retain all Norbordmills in North America and Europe, and rely on the skills and experience of current Norbordmanagement and employees to continue to grow the engineered woodbusiness. West Fraserwill continue to maintain a significant office presence in Vancouver, Toronto, Quesnel and Memphis, as well as in Norbord’s existing European locations.
  • Meaningfully enhanced capital markets profile –with last twelve months (LTM)combinedrevenues of C$8.0billion(US $5.9billion)and LTMAdjusted EBITDA of C$1.7billion1(US $1.2 billion), West Fraserwill be aclear leader among historical peers, and well-positioned among a larger comparable peer universe. With a strong balance sheet and leverage position, West Fraserexpects the Transaction will lead to a reduced cost of capital. To facilitate the further participation of investors in West Fraser’s securities, West Fraserwill apply to list its common shares on the New York Stock Exchange on or prior to closing,and intends to begin reporting its financials in U.S. dollarsfollowing closing.
  • More stable cash flows and increased resilience–with increased scale, and diversity across products and end uses, geographies, and markets, the combined company will have a stronger financial ability to weather volatility and deliver returns through the cycle.
  • Balanced Capital Allocation –West Fraserexpects to continue its long-term track record of balanced capital allocation including maintaining appropriate financial flexibility, strategically investing to maintain low cost operations,and efficientlyreturningcapital to shareholders on a regular basis.
  • Meaningful synergies extend track record of cost leadership –the companies are already leaders on costs and Adjusted EBITDA1margins in their respective segments, and the Transaction is expected to improve thatperformance through meaningful synergies of up to C$80million(US$61 million)annually from fibre supply chain simplification, shared purchasing programs,transportation optimization, leveraging technologyto improve reliability and productivity, and more efficient capital allocation. These synergies are expected to be achievedwithintwo yearsof closing

West Fraserwill continue to be led by Mr. Ferrisas Chief Executive Officer and Chris Virostekas Chief Financial Officer. Following closing, Mr. Wijnbergen will be appointed President, Engineered Wood, responsible for the company’s OSB, plywood, particleboard,MDF and veneer operations. Sean McLaren,currentlyWest Fraser’s Vice-President, U.S. Lumber, will be appointed President, Solid Wood, responsible for all of the company’s lumber operations. West Fraser’s Board of Directors will continue to be chaired by HankKetcham.At closing, two of Norbord’s current independent directors will join the West Fraser Board.

At the Forefront of Sustainability and Responsibility

The Transaction enables West Fraserto further its commitment to safety and sustainability as well as environmental, social and governance (ESG) responsibility.

  • Safety as the overarching priority –both West Fraserand Norbordview safety as a hallmark of operational excellence and will continue to strive for improvements in safety performance by leveraging best practices from both companies, including Norbord’s “Stronger Together” initiative.
  • Increased productive fibre utilization –with a more diverse production platform West Fraserwill be able to more fully utilize harvested logs, for example by producing OSB with tree thinnings and marginal wood inappropriate for lumber products.
  • Expanding carbon storage –the combined company’s wood building products already represent a meaningful contribution to reducing carbon from the air, storing approximately 15 million tonnes of carbondioxide equivalentper year; greater scale and market opportunities will allow for West Fraserto manufacture a wider range of carbon-storing building products.
  • Dedicated sustainability practices –across the combined company, the fibre supply chain is 100% certified for responsiblesourcing, and 100% of harvest sites are reforested.
  • Reducing emissions –West Fraserremains committed to the “30 by 30” Climate Change Challenge, an industry-wide effort to help Canada move to a low-carbon economy by removing 30 megatonnes of CO2per year by 2030.
  • Progress on diversity –West Fraserfirmly believes that all of its stakeholders benefit from the broader exchange of perspectives and balance brought by diversity of background, thought and experience, and to this end welcomes the opportunity to add two women as independent members of its Board of Directors, significantly enhancing its gender diversity.Added Mr. Ferris: “Environmental stewardship, sustainability and social responsibility are at the heart of everything we do, and we are energized by the new opportunities we will have with a larger platform, an expanded team, and greater reach.”

Added Mr. Ferris: “Environmental stewardship, sustainability and social responsibility are at the heart of everything we do, and we are energized by the new opportunities we will have with a larger platform, an expanded team, and greater reach.”

Transaction Agreements

The Transaction will be completed pursuant to an arrangement agreement entered into between West Fraserand Norbord. Norbord’s principal shareholder, Brookfield Asset Management Inc.and its controlled entities(“Brookfield”)have entered into a voting support agreement (the “Brookfield Support Agreement”), pursuant to which Brookfield has agreed to vote all of its Norbord common shares, representing, in total, approximately 43% of the Norbord common shares, in favour of the Transaction at a special meeting of Norbord shareholders to be held to consider the proposed Transaction (the “Norbord Meeting”).Under the Brookfield Support Agreement, Brookfieldhas also agreed to vote in favour of the recommendations of West Frasermanagement in connection with ordinary course matters at the 2021 annual general meeting of West Frasershareholders.

Certain affiliates of members of the Ketchamfamily have entered into voting support agreements with Norbordpursuant to which they have agreed to vote atotal of 13,013,800common shares, including Class B shares,of West Fraser, representing approximately 19% of the outstanding common shares of West Fraserin favour of the Transactionat a special meeting of West Fraser shareholders to be held to approve the Transaction (the “West Fraser Meeting”).

As part of the Transaction, West Fraser has secured US$1.3 billion(C$850 million and US$650 million) in committed credit facilities, which are available upon closing and estimated to provide U$1.1 billion in undrawn revolving capacity. The committed facilities were provided by TD Securities as sole underwriter and bookrunner.

Transaction Conditions and Timing

The Transaction will be implementedby way of a court-approved plan of arrangement under the Canada Business Corporations Act (the “Arrangement”). The Arrangement will require the approval of 662/3% of the votes cast by Norbordshareholders present in person or represented by proxy at the Norbord Meeting. West Fraserwill be required under the policies of the TSX to obtain the approval of a simple majority of the votes cast by the holders of West Fraser’s common and Class B shares at the West Fraser Meeting.

The completion of the Transaction will also be subject to the listing by West Fraserof its common shares on the New York Stock Exchange (“NYSE”). As a result, U.S. shareholders of Norbordwill receive shares of West Fraserupon completion of the Arrangement that will be tradeable on the NYSE.

In addition to shareholder approvals the Transaction will also be subject to approval by the Ontario Superior Court of Justice,regulatory approvals and closing conditions customary in transactions of this nature.

The Arrangement Agreement provides for customary deal-protection provisions, including mutual non-solicitation covenants and rights to match superior proposals. The Arrangement Agreement includes a reciprocal termination fee of C$110 millionthat may be payable by either West Fraseror Norbordin certain circumstances.

A copy of the arrangement agreement between West Fraserand Norbordwill be available on West Fraser’s and Norbord’s company profileson SEDAR at www.sedar.com.

It is anticipated that the meetings of the West Fraserand Norbordshareholders to consider the Transaction will be held in January 2021. The Transaction is expected to close in the first quarter of 2021.

Board of Directors’ Recommendations and Support Agreements

The Boards of Directors of each of West Fraserand Norbordhave unanimously approved the Transaction and recommend that the West Fraserand Norbordshareholders vote in favour of the Transaction.

TD Securities and Scotiabankhave each provided a fairness opinion to the Board of Directors of West Fraserstating that, as of the date of such opinions and based upon and subject to the assumptions, limitations and qualifications stated in such opinions, the consideration to be paid by West Fraserto the shareholders of Norbordis fair, from a financial point of view, to West Fraser. RBC Capital Markets has provided a fairness opinion to the Board of Directors of Norbordstating 5that, as of the date of such opinion and based upon and subject to theassumptions, limitations and qualifications stated in such opinion, the consideration under the Transaction is fair from a financial point of view to the shareholders of Norbord.

Advisors and Counsel

TD Securities is serving as financial advisor to West Fraser. Scotiabankis serving as independent financial advisor to the Board of West Fraser. McMillan LLP is acting as legal counsel to West Fraser.

Torys LLP is acting as legal counsel to Norbord.

Source: West Fraser