Chadwick Wasilenkoff with the purchase of the paper mill in Thurso, is not the only British Columbia businessman to make contrarian investments in Québec. On March 29, 2010 (just 11 days after the Thurso transaction), it was the turn of fellow B.C. entrepreneur Rick Doman to buy assets in Québec that nobody seemed to want …

His company, Eacom Timber (TSX Venture – ETR) has completed the acquisition of 7 Domtar sawmills (3 in Quebec and 4 in Ontario). When we look at the present state of the lumber industry, it’s clearly a very bold and contrarian investment. The price of lumber is currently too low for these mills to be profitable. Two of them (Sainte-Marie and Ear Falls) are even inactive.

Rick Doman is obviously betting on a turnaround. He said the supply of lumber is expected to decline in coming years because of the devastation caused by an insect (the pine beetle) in Western Canada and Northwestern U.S. forests. Meanwhile, economic recovery will increase demand. The decrease in supply coupled with increased demand should raise lumber prices and transform Eacom’s sawmills into highly profitable operations.

Eacom paid 129 million to Domtar for the mills (102 million cash and 27 million in shares of Eacom). The company conducted a share issue of 145 million to finance the acquisition. Following this transaction, Eacom has no debt and still has 43 million in cash.

Rick Doman has worked all his life in the lumber industry. His father, Herb Doman, is the founder of Doman Industries (now Western Forest Products). He knows the domain very well and applies the old contrarian investor recipe of buying when the market is bottoming out and then waiting for a rebound. The transaction is perhaps bold only in appearance …

In conclusion, the lack of daring entrepreneurs in Québec seems more and more evident when compared to the likes of Wasilenkoff and Doman!

Bertrand Marotte Globe and Mail article

Fabrice Taylor Globe and Mail article

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