BUSINESS

Domtar buys U.S. baby diaper maker Associated Hygienic Products for $272M

05/28/2013 09:41 EDT | Updated 07/28/2013 05:12 EDT
MONTREAL - Domtar Corp. (TSX:UFS) has signed a $272-million deal to buy Associated Hygienic Products, a U.S. maker of store brand infant diapers, from DSG International.

Domtar estimates that its personal care division will see $10 million in annual savings within two years of the deal, benefiting from lower purchasing costs, lower general and administrative costs and a sharing of best practices.

AHP has a 376,000-square-foot manufacturing plant in Delaware, Ohio, and a 312,000-sq.-ft. manufacturing facility in Waco, Texas.

The company, with more than 600 employees and $320 million of annual sales, also has administrative offices and a distribution centre in Duluth, Ga.

The deal is expected to close in the second quarter of this year, subject to closing conditions.

"The market for store brand infant diapers is growing steadily in North America driven by high quality products and a strong value proposition," Domtar president and chief executive John Williams said in a statement Tuesday.

"The acquisition of AHP will provide meaningful market expansion opportunities and innovative product development capabilities with our existing personal care business, as well as synergies to the bottom line."

Domtar manufactures and sells a wide variety of wood fibre products including office, specialty and packaging papers and adult incontinence products.

Moody's Investors Service said Tuesday that Domtar's Baa3 senior unsecured rating and stable outlook remained unchanged.

"The acquisition modestly increases Domtar's scale and diversification, and is consistent with the company's growth strategy of acquiring growing businesses to offset the company's declining paper-based operations," the debt rating agency said.

Domtar shares closed up $1.58 at $72.23 on the Toronto Stock Exchange on Tuesday.