Today news broke that pulp and paper giant Paper Excellence is about to swallow up Canada’s Resolute Forest Products in a deal worth US$2.7 billion.
“We are very alarmed by this development,” says Shane Moffatt, head of Greenpeace Canada’s Nature and Food Campaign. “It calls for much greater scrutiny of the ownership of Paper Excellence. And it raises more questions about the impact of the logging industry on biodiversity and forests right across Canada into the future.”
This latest Paper Excellence acquisition will give it ownership of Resolute’s “40 facilities, as well as power generation assets, in the United States and Canada.”
The announcement comes just seven months after Paper Excellence swallowed up the North American pulp and paper giant Domtar in a $3 billion deal.
And the Domtar acquisition by Paper Excellence came just two years after the company, part of the massive Sinar Mas Group owned by the multi-billionaire Sino-Indonesian Widjaja family, took over Catalyst Paper in British Columbia, and the giant Eldorado pulp mill and fibre allocations in Brazil.
The Paper Excellence buying spree in the western hemisphere began in 2010, when the company took possession of the MacKenzie pulp mill (which it has now permanently closed) and Canfor’s Howe Sound mill in British Columbia, as well as two mills in southern France.
In 2011, Paper Excellence acquired the Prince Albert mill in Saskatchewan, and the Northern Pulp mill in Nova Scotia, along with its affiliate, Northern Timber, to which the provincial government of Darrell Dexter had recently loaned $75 million so the company could purchase 475,000 acres of timberland in Nova Scotia.
That loan, which included a hidden gift of $7 million when the province immediately bought 55,000 of those acres back from Northern Pulp for 1.7 times the price per acre the company had paid for it, has still not been repaid. Repayment is on hold because Northern Pulp and six of its affiliates are enjoying creditor protection in the British Columbia Supreme Court, having declared themselves “insolvent” in June 2020.
Adding injury to insult, Paper Excellence has also launched a $450-million lawsuit against the province of Nova Scotia for profits it claims it lost by closing Northern Pulp nine years before the lease on Boat Harbour would expire.
Related: Northern Pulp says it is “insolvent” and can’t pay its pension obligations, but it’s got lots of cash to bankroll assaults on Nova Scotia’s government and laws
Today, even without the Resolute assets, Paper Excellence owns 11 pulp and paper mills across Canada (one in Nova Scotia, one in Quebec, two in Ontario, two in Saskatchewan, and five in British Columbia), but in the past few years it has also been busy shutting mills down – as it did in MacKenzie and Powell River in BC.
The Domtar purchase gave Paper Excellence its first foothold in the United States — and a huge one at that — with ownership of many facilities and eight pulp and paper mills there.
The Domtar deal went through in spite of an open letter signed by 68 organizations from North America, Indonesia, and all over the world urging Domtar shareholders to reject it because of the “serious reputational and financial risk” it would cause the company. Said the letter:
The acquisition will connect Domtar to the notorious conglomerate Asia Pulp & Paper (APP) of Sinar Mas Group (SMG). There is clear evidence linking APP and SMG to 30 years of deforestation, forest and peat fires, and the destruction of wildlife habitat in the 2 million hectares of land under their control. Such fires, and the company’s peat development have contributed to extensive greenhouse gas emissions. Reports also point to conflicts with local communities related to land grabbing, forest clearance, and pulpwood plantation development in Sumatra and Kalimantan, Indonesia.
Paper Excellence is related to APP and its parent company Sinar Mas Group, via their family business ownership. These, and hundreds of associated companies — many of them incorporated in tax haven countries — are tied by a complicated and opaque corporate structure, with different companies often being managed by members of the same family. Although a complex corporate structure obfuscates the connection between the Paper Excellence Group and APP, strong evidence indicates the two groups operate as a deeply integrated production-marketing conglomerate with the same family business as owner. [emphasis in the original]
Related: Paper Excellence’s very big deal. Northern Pulp’s parent company is set to acquire the North American pulp and paper giant Domtar. While the acquisition is getting very little media attention in Canada, around the world many people are worried about it — for many good reasons.
The Environmental Paper Network, a global network of 150 civil society organizations, also provided a list of “severe social and environmental impacts” linked to the APP – Sinar Mas Group and Paper Excellence.
Nevertheless, the Domtar deal went ahead, and Paper Excellence became the largest pulp and paper manufacturer in Canada, which also gave it access to vast areas of forest for fibre.
The only sign of any hesitation about such a massive concentration of control of the industry came when the Competition Bureau of Canada determined that the Domtar takeover would give Paper Excellence too much control of the “southern interior and coastal region of British Columbia,” and stipulated that Paper Excellence would have to sell the Domtar mill in Kamloops to an independent buyer, which it did recently to Kruger.
It’s not easy keeping track of all the mills, distribution facilities, generating plants and massive forest lands that Paper Excellence will own in North America once this latest deal with Resolute goes through, as it is supposed to do by the first half of 2023.
Canada’s Paper Excellence?
But there’s something else that is hard to keep track of, something that should be giving people across Canada and the US a great deal of pause.
Namely, who and what is Paper Excellence and how much control of the pulp supply chain and fibre supply is it after, not just in Canada, but globally?
In its announcement today about its planned takeover of Resolute, the company describes the move as a “strategic transaction to accelerate Paper Excellence’s growth strategy, bringing complementary capabilities in lumber and pulp.”
The headline on the Reuters news story about the acquisition describes Paper Excellence as “Canada’s.”
If there is one thing Paper Excellence is not, it is “Canada’s.”
Even Paper Excellence can’t seem to make up its mind about who and what it is.
While it generally claims to be headquartered in British Columbia, one Paper Excellence web page says the Paper Excellence Group is “a privately-held diversified manufacturer of pulp and specialty, printing and writing, and packaging papers” that is “headquartered in Southern California.”
Related: Corporate shell game Part 1. Northern Pulp seeks protection from its creditors in a BC court – and its largest creditor is its owner, Paper Excellence
Related: Corporate shell game Part 2. Northern Pulp- affiliated companies say that without major concessions, they won’t be able to pay back nearly $86 million they owe to the province of Nova Scotia, so far, however, the government has not caved, and is not agreeing to new financing.
Related: The “weird” legal mechanism being used by Northern Pulp in its $450 million lawsuit against Nova Scotia
Statistics Canada’s Inter-corporate ownership analysis of the Sinar Mas Group in Canada shows it has 64 associated companies, some nested eight layers deep.
Even those companies that are domiciled in Canada, such as Paper Excellence Canada Holdings Corporation, are controlled out of Indonesia, according to Statistics Canada.
Sinar Mas owns 100% of Paper Excellence BV, a trading company that is domiciled at an address of convenience in the popular tax haven that is Netherlands, and which in turn owns Paper Excellence Canada Holdings Corporation, and so on, and so on, down the complex and confounding corporate maze.
Ultimately, all are owned by the Widjaja family of Indonesia.
The Widjaja family’s APP still holds the record for the largest corporate default in emerging markets, when it defaulted on nearly US$14 billion in 2001.
An August 15, 2003 article by Timothy Mapes in the Wall Street Journal noted that although APP repaid Chinese banks about $700 million in the first year after the debt was frozen, other creditors were not so fortunate. The Examiner reported on the Mapes article in this June 11 article:
“Creditors wanted repayment of APP’s $13.9 billion debt. They accused the family of shifting hundreds of millions of dollars from the business into offshore accounts. Indonesian regulators seized the family-run bank, cutting off a crucial source of funds. APP’s shares were kicked off the New York Stock Exchange after their value plunged to almost nothing. Environmentalists decried the papermaker’s destruction of Indonesian rain forests.”
Eleven ambassadors to Indonesia — including Canada’s — wrote to Indonesia President Megawati Sukarnoputri in 2003 warning that, “failure to reasonably satisfy the creditors of APP will affect the confidence of future potential investors into Indonesia.”
The Wall Street Journal also reported that the creditors learned at a 2001 meeting with APP that five trading companies in the British Virgin Islands — the world’s #1 tax haven and financial secrecy jurisdiction — owed APP subsidiaries nearly US$1 billion. And: “… APP said those companies weren’t related to the group or to the Widjaja family. But The Wall Street Journal learned that several APP employees worked at those companies as officers or agents.”
A lawyer for Deutsche Bank, which APP owed US$193 million, wrote to a Singapore court that the Widjaja family had been “using their own companies as family piggy banks.”
Taking control of the fibre and pulp supply chain
Speaking with the Halifax Examiner, Sergio Baffoni, coordinator of the Environmental Paper Network’s Indonesian rainforests campaign, says people in Canada should be very wary of the rapid and dramatic expansion of Paper Excellence in North America.
“It’s a huge company and it acts like a single, well-organized market group, not just market, but industrial group,” says Baffoni. “Any single little or middle distributor that is controlled by Paper Excellence will not take a single step if it is not under the coordination and integration into the global Asia Pulp & Paper / Sinar Mas business strategy.”
“They are all very integrated pieces of one single, huge and efficient machine,” says Baffoni.
In his view, the takeover of mills across North America is part of a long-term plan to secure a supply of fibre, and especially the long fibres from northern forests in Canada.
If a mill works well it will remain open, Baffoni says, but the main thing that Paper Excellence is interested in is securing fibre supplies, which includes access to forests.
Other informed sources tell the Examiner that the Widjaja family has very good and high level ties in China, where the family companies have a huge corporate presence, and this expansion is part of a long-term strategy by that country to take control of the fibre and pulp supply chain.
Baffoni finds it “a bit scary” that so few people, including Canadian regulators, seem to know much about Paper Excellence and its owners, not just one of the richest but also considered one of the most powerful families in Indonesia.
Greenpeace’s Shane Moffat tells the Examiner that the “lack of transparency in Paper Excellence is astounding.”
“It’s fairly stunning how willing a number of provincial governments have been to open their doors and forests to this operator,” Moffatt says.
And, as it turns out, even as Paper Excellence and the Sino-Indonesian Widjaja family interests expand in Canada, the federal government is now busy negotiating a “Canada – Indonesia Comprehensive Economic Partnership Agreement (CEPA)” — a free trade agreement — that could open up Canada’s forests and governments up to even more Paper Excellence control.
We’ll be reporting on that agreement and its implications in coming days.
The company supplies product to China.
Thanks for this timely update so soon after the announcement of the Resolute takeover. Regulators in Canada and the US have to open their eyes to the takeover of the pulp and paper industry in North America by the Widjaja family and potentially to the backhanded takeover by the Chinese banks.
Thank you for all the hard work on this company. Impressive. Keep it coming.