Segezha Group to acquire forestry assets in Siberia for US$515 million

Segezha Group, a company that performs full cycles of operations from logging to advanced wood processing, has announced that it has agreed to acquire a 100% stake in Inter Forest Rus, which comprises 24 forest industry assets and a substantial forest resource base in the Krasnoyarsk and Irkutsk regions for US$515 million.

With the transaction, Segezha Group will strengthen its position as a producer of sawn timber in Russia and Europe, and will become a global top 10 producer in the segment. At the same time, the company will almost double its annual allowable cut (AAC) to 23.6 million m3 and become one of the world’s largest lease-holders of forest land with 16 million ha of forests under management. The group’s sawn timber production capacity will almost double to 3,221,000m3, an increase of 1,500,000m3. Pellet production capacity will grow by 1.8 times to 380,000 tonnes, an increase of 170,000 tonnes. Additionally, the company’s plywood production capacity will increase by 35,000-40,000m3 to 232,000m3.

Inter Forest’s assets include wood processing and logging enterprises, including four woodworking plants and one plywood plant, as well as a river fleet of 98 vessels. Inter Forest has an AAC of approximately 10.9 million m3.

The transaction is expected to close in Q1 2022, following customary regulatory and corporate approvals, as well as fulfilment of other conditions precedent agreed by the parties.

The acquired assets are expected to be consolidated into Segezha Group’s financial statements from Q1 2022. Segezha Group expects a significant positive effect from the transaction. The combined businesses would have had an operating income before depreciation and amortisation (OIBDA) of 18.2 billion to 19.2 billion rubles, and an OIBDA margin of approximately 31%, according to Segezha Group estimates. They reported OIBDA of 13.2 billion rubles and an OIBDA margin of 31% for H1 2021.

Mikhail Shamolin, president of Segezha Group, commented: “This is a transformational transaction for Segezha Group, one that will enable us to take a significant step in developing our assets. Combined with our Lesosibirsk plant and the recent consolidation of the Novoeniseisk Wood-Chemical Complex, we will be able to create a powerful Siberian cluster to complement our long-established hub in the northwest of Russia. This will enable us to expand our geographical footprint and strengthen our offering of high-value-added products to end customers, including in the fast-growing Chinese market.”

The established transport infrastructure and river fleet of the acquired assets will create additional synergies for optimising raw materials supplies to Segezha Group’s Siberian assets, which will ensure a high level of self-sufficiency in raw wood.

Segezha Group will continue to develop its customer base thanks to Inter Forest’s links with partners in Russia, China, Japan, Egypt, the Commonwealth of Independent States (CIS) and Europe. The company will focus in particular on fast-growing markets in Asia. Segezha Group estimates that the combined company may account for approximately 10% of Russian sawn timber exports to Asia, and plans to further grow sales to this region going forward.