The ownership structure underpinning Canfor Pulp Products Inc. (CPPI) is about to be simplified.
Canadian Forest Products Ltd. (CFP) gave notice last week it will exercise its right to exchange its 50.2 per cent interest in Canfor Pulp Limited Partnership (CPLP) for a 50.2 per cent direct interest in CPPI.
The arrangement's roots date back to 2006 when CFP spun out its three Prince George pulp mills into the Canfor Pulp Income Trust (CPIT) retaining a 50.2-per-cent interest in the trust while giving 49.8 per cent to its shareholders.
Income trusts have been popular with investors as they normally promise a high, steady cash return, but when the federal government said it would start taxing income trusts, CPIT was replaced with CPLP in January 2011. CPLP acted as the holding company for CPPI.
"If you want to think of it this way, Canfor took its 50.2 per cent
interest [in CPLP] and sold it to Canfor Pulp [CPPI] and it took back stock," said Dave Bustos, a managing director at RBC Capital Markets in Vancouver.
The move will simplify the structure.
"Now, they'll just own the same thing the public owns as opposed to indirectly through a limited partnership instead of a public
company," Bustos said.
The exchange is expected to be completed by March 12.
