Domtar sells unit to EACOM

Montreal-based Domtar is selling its forest products business to a fledging lumber company, EACOM Timber Corp., for $80 million.

The deal means EACOM will move its head office from Vancouver to Montreal.

The companies say the move sets EACOM upfor benefit froma recovery in the U.S. housing market and allows Domtar to focus on its core activities in pulp and paper.

In addition to the $80 million for the forestry products business, Domtar will also get between $30 millionand $40 million in working capital in a cash-and-stock deal that will leave the Montreal-based company with an 11 per cent stake in EACOM.

EACOM chief executive Rick Doman, whose father Herb was a well-known entrepreneur in the B.C. forestry industry, said Domtar's mills and people in Ontario and Quebec will help provide more wood to meet a coming shortage.

"We also feel that from Eastern Canada, there's a huge opportunity not only to grow the business in Quebec and Ontario, and of course into the United States, but to grow the business into Europe, United Kingdom and the Middle East," Doman said in an interview.

Two-year-old EACOM will take on about 1,000 new employees and five operating sawmills in various regions including Timmins, Nairn Centre and Gogama, Ont., Val-d'Or and Matagami, Que., as well as two non-operating mills in Ear Falls, Ont. and Ste-Marie, Que.

EACOM shares closed up 14 cents, or almost 17 per cent, at 97 cents on the TSX Venture Exchange, while Domtar finished 66 cents higher at $66.14 on the TSX.