In early 2018, Blue Wolf Capital Management received an offer to sell both its mill in Arkansas (Caddo) and its mill in Florida (Suwanee) to Conifex, an upstart Canadian lumber company. Blue Wolf hadn’t planned to put both mills up for sale yet, but was the deal too good to pass up?
When they bought Caddo in 2017, Blue Wolf decided to put the mill under a holding company structure (Blue Wolf Suwanee Lumber Holding Company (BW SLCH) with its mill in Florida. This allowed Blue Wolf to leverage knowledge built at Suwanee (which they had bought in 2013) to restart the mill at Caddo. Suwanee personnel played a key role in helping the new management at Caddo set-up operations. The restart had gone smoothly, but Caddo was far from working at capacity. At Suwanee, management had also initiated a modernization project that was set to increase the capacity of the plant but had not yet significantly increased the bottom line.
The Conifex offer would pay BW SLCH US$172.9 million in cash along with nearly 20% of Conifex’s stock (plus warrants for more stock). Blue Wolf had invested nearly $36.5 million into rehabilitating the Suwanee and Caddo mills. However, neither was fully operational yet. Did the offer price fairly value the prospects of the mills? How should Blue Wolf consider the Conifex stock? Should Blue Wolf conduct a more extensive sales process rather than settle for this somewhat unexpected offer?
Publication: May 22, 2020
Citation: Jaan Elias, Adam Blumenthal, James Shovlin, and Heather E. Tookes, " Suwanee Lumber Company (B)," Yale SOM Case 20-011, May 22, 2020.
Keywords: Private Equity