RFP - Resolute Forest Products CVR may be worth more than $3/share

The CVR, or contingent value right, associated with the Resolute Forest Products ( NYSE: RFP ) sale to Domtar is likely worth over $3/share, according to RBC. RFP shares jumped 63% on the acquisition news.

The timing for the resolution of the softwood lumber dispute between Canada and the U.S. is unclear, RBC analyst Paul C. Quinn, who has an outperform and $19 price target on RFP, wrote in a note earlier.

"There have been no substantive discussions on a potential resolution since the CVD and AD duties were implemented in 2017, so the timing of an eventual resolution is unclear," Quinn wrote. "However, we would value the CVR at over $3/share."

Some transactions that may provide color as far as the value of softwood lumber deposits include in June 2019 Conifex monetized its deposits to date at 42.5%, while in November 2021 Interfor agreed to acquire Eacom Timber and valued Eacom's softwood lumber deposits at 55%, Quinn wrote.

As far as regulatory concerns for the deal there's little overlap between Domtar/Paper Excellence and RFP. There is overlap in market pulp, specifically in NBSK pulp.

Earlier, Paper Excellence Group's Domtar subsidiary agreed to acquire RFP for $20.50/share, in a deal with an enterprise value of ~$2.7B.

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