FORT MILL, S.C. (From news reports) -- Domtar is unlikely to see a higher bid than the mid $50s/share that Paper Excellence is reported to have bid, according to KeyBanc.

The reported price would valued Domtar at ~6x consensus 2021 EBITDA estimate, while Domtar has historically traded at ~5X EBITDA, KeyBanc analyst Adam Josephson wrote in a note. Also any potential bid would come at a time of "near-record" pulp price in China, though pulp prices are "exceedingly volatile."
The analyst notes that Paper Excellence has been on a pulp "buying spree" over the past decade.

KeyBanc didn't see Paper Excellence bid coming as for much of the past year there has been speculation of a takeover of Domtar, though Packaging Corp. of American was mainly mentioned as a possible buyer.

"Paper Excellence has encountered problems with some assets it has acquired in North America in recent years, but the company appears undeterred, at least judging by this news," Josephson wrote.

In January, RBC predicted consolidation this year in the packaging and paper sector and saw Packaging Corp. or Westrock as potential buyers of Domtar.

Statement from Domtar
Domtar has been made aware of press speculation regarding discussions between the Corporation and Paper Excellence with respect to a possible business combination or acquisition.

In response to that speculation, Domtar acknowledges that its management has been in discussions with Paper Excellence about such a potential transaction. However, these discussions may or may not result in an agreement.

Domtar does not intend to make further comment unless or until there is a transaction to announce.