BMO Capital Markets Reiterates Outperform Rating, $90 PT on Domtar Corp. Following AHP Acquisition

In a report published Wednesday, BMO Capital Markets analyst Stephen Atkinson reiterated an Outperform rating and $90.00 price target on Domtar Corp. UFS. In the report, BMO Capital Markets noted, “AHP has annual sales of $320 million and EBITDA of $31 million. Domtar estimates synergies of $10 million within two years, implying a simple payback of 6.5 years. The acquisition provides Domtar with access to the retail sales channel. Domtar would combine its Attends adult incontinence diaper line with the AHP baby diaper line. AHP is the largest producer of private-label infant diapers (e.g., Fisher Price Happy Nights) with two modern manufacturing facilities in Delaware, Ohio (near Columbus), and Waco, TX. Domtar could install a manufacturing line at the Waco, TX, facility rather than shipping from Greenville, NC, enabling it to better service the West Coast market and save about 1,300 miles in freight. Domtar intends to grow its diaper business to over $200 million EBITDA by 2017. We estimate Divisional 2014 EBITDA at $100 million. Domtar stock is down 24% in the past year. We consider the stock attractive for value investors. Our rating is Outperform.” Domtar Corp. closed on Tuesday at $66.50.