07/18/2017 07:53 EDT | Updated 07/18/2017 08:00 EDT

Tembec takeover under threat after two largest shareholders oppose deal

MONTREAL — The takeover of forestry company Tembec appeared under threat after the company's second-largest shareholder said it will vote against the friendly offer by Rayonier Advanced Materials.

Restructuring Capital Associates (RCA), which owns 17.1 per cent of Tembec shares, said Tuesday it will join Oaktree Capital Management in opposing the transaction at the vote July 27.

Together the company's two largest shareholders control 37 per cent of Tembec (TSX:TMB) shares.

The takeover requires support by a two-thirds majority vote of shareholders.

RCA said it is supportive of Tembec management and board's turn-around efforts and the proposed merger with Rayonier Advanced Materials. However, it said the Florida company must respond more appropriately to Oaktree's complaints which it rejected as "misleading" on Monday.

"The strategic merit of this unique combination can improve profitability exponentially and Oaktree makes a compelling case that Rayonier can and should improve its offer," RCA founder James Bennett said in a news release on Tuesday.

Rayonier Advanced Materials (NYSE:RYAN) could not immediately be reached for comment on RCA's decision. On Monday, it said it stood by its offer of $4.05 in cash or 0.2302 of a share in Rayonier Advanced Materials, subject to a cap on the total amount of cash and shares that will be issued.

The friendly offer is 37 per cent above where Tembec's shares traded before the proposal, however it lags the $4.21 the shares traded for in morning trading on the Toronto Stock Exchange.