Catalyst to acquire Snowflake mill from AbitibiBowater and to proceed with C$125 million Rights Offering



    VANCOUVER, Feb. 11 /CNW/ - Catalyst Paper Corporation (TSX:CTL) today
announced that it has entered into a definitive agreement with a subsidiary of
AbitibiBowater to acquire its Snowflake Arizona recycled newsprint mill for a
total consideration of US$161 million in cash. The purchase price excludes
trade receivables of approximately US$19 million that are being retained by
AbitibiBowater. The acquisition will be financed through a combination of
Catalyst Paper's revolving credit facilities and a proposed C$125 million
rights offering.

    The Acquisition

    The Snowflake mill, a leading recycled newsprint producer with annual
production capacity of 375,000 metric tonnes on two modern paper machines, is
regarded as one of the lowest cost newsprint mills in North America. The
acquisition of the Snowflake mill will increase Catalyst Paper's total
newsprint production capacity to approximately 980,000 metric tonnes. The mill
also houses a corrugating medium machine owned by Smurfit Stone Container
Corporation, which is operated by the Snowflake mill. The Apache Railway
Company, a short-line railroad operating freight service between Snowflake, AZ
and Holbrook, AZ is also included in the transaction.
    In 2006, the Snowflake mill generated earnings before interest, taxes,
depreciation and amortization ("EBITDA") of US$58 million on net revenues of
US$195 million. For the last 12 months ending September 30, 2007, the
Snowflake mill generated EBITDA of US$30 million on net revenues of
US$185 million. These EBITDA figures exclude AbitibiBowater corporate charges.

    
    The acquisition of the Snowflake mill assets will provide the company
with:
    -   one of the lowest-cost newsprint mills in North America;
    -   geographic, fibre and currency diversification;
    -   the opportunity to expand into one of North America's fastest growing
        metropolitan regions, with no other newsprint mill operating within a
        1,600 kilometre radius;
    -   an energy self-sufficient asset with the potential to sell excess
        electricity onto the power grid;
    -   expected annual synergies of at least US$10 million through increased
        scale which will provide general overall cost reduction in
        purchasing, sales, marketing and other services, and optimization of
        product distribution networks; and
    -   favourable business environment and industry hosting conditions.
    

    "Snowflake is a first-class newsprint mill," noted Richard Garneau,
president and chief executive officer of Catalyst Paper. "We are very pleased
to announce this transaction as the Snowflake mill will improve our
cost-competitiveness, strengthen our presence on the west coast of North
America and provide us with a more freight logical way to serve existing as
well as new customers. In addition, this acquisition will provide Catalyst
with a natural hedge against Canadian dollar fluctuations and is particularly
timely in the current environment of virgin fibre supply constraints."
    The acquisition of the Snowflake mill is subject to the consent of the
U.S. Department of Justice, other customary conditions and completion of the
rights offering financing and is expected to close in the second quarter of
2008. The transacting parties have also agreed to a three-year supply contract
under which AbitibiBowater will provide approximately 40% of the Snowflake
mill's recycled fibre supply in the first year, decreasing in proportion over
the life of the agreement. Catalyst Paper intends to source the remainder of
the mill's fibre requirements directly from the recycled fibre market in
western North America.

    Financing the Acquisition

    The acquisition will be funded through a combination of debt and equity.
Catalyst Paper intends to raise the equity portion by way of a C$125 million
rights offering. Catalyst Paper has entered into an oversubscription agreement
with Third Avenue International Value Fund ("TAVIX"), a fund related to Third
Avenue Management LLC, under which TAVIX has agreed to exercise rights to
subscribe for up to C$62.5 million of subscription receipts not otherwise
subscribed for under the rights offering. TAVIX, along with other client
accounts for which Third Avenue Management LLC serves as investment adviser,
is Catalyst Paper's largest shareholder.
    In addition, Catalyst Paper has entered into a standby purchase agreement
for the remaining C$62.5 million with BMO Capital Markets and Genuity Capital
Markets, pursuant to which the standby purchasers have agreed to take up any
subscription receipts not otherwise subscribed for under the rights offering.
The remainder of the purchase price consideration will be financed using
availability under Catalyst Paper's revolving credit facilities. The rights
offering, which is subject to regulatory approval, will be made pursuant to a
prospectus to be filed in each of the provinces of Canada. A registration
statement will also be filed with the U.S. Securities and Exchange Commission.
Further details of the distribution of the rights will be provided in the
prospectus and registration statement.
    Under the terms of the rights offering, common shareholders of Catalyst
Paper as of a record date which is yet to be determined, will receive rights
to subscribe for subscription receipts of Catalyst Paper. Each subscription
receipt will be automatically exchanged for one Catalyst Paper common share
without additional consideration on completion of the Snowflake mill
acquisition. The subscription price under the rights offering will be a 40%
discount to the theoretical ex-rights price based on the five-day volume
weighted average price of the common shares of the Company on the TSX prior to
filing the final prospectus. Application will be made to list the rights for
trading on the TSX. The rights will be exercisable for at least 21 days
following the date of mailing of the final prospectus.

    Board Approval and Financial Advisor

    The Board of Directors of Catalyst Paper has approved these transactions.
BMO Capital Markets acted as exclusive financial advisor to Catalyst Paper on
the acquisition.

    Additional Information and Conference Call for Investors

    Additional details on the proposed acquisition can be found on the
Catalyst Paper website at www.catalystpaper.com. Catalyst Paper will release
its annual financial results for the fourth quarter and year-end December 31,
2007 on Wednesday, February 13, 2008. Catalyst Paper's senior management team
will provide summary remarks on the fourth quarter 2007 and additional
background on the Snowflake acquisition during a conference call for analysts
and investors which will take place on Thursday, February 14, 2008 at
8:00 a.m. Pacific, 11:00 a.m. Eastern. If you wish to participate and are
calling from within North America, dial (800) 732-0232.
    If you are calling from either the Toronto area or outside North America,
dial (416) 644-3418. Please place your call 10 minutes prior to the start of
the conference, provide the conference administrator with your name and
company name, and ask for the Catalyst Paper fourth quarter 2007 earnings
conference call or quote reservation number 21260314 followed by the pound
sign. Initially, all participants will be in a listen-only mode for a short
recap of quarterly results followed by a question and answer session. You will
be queued by the conference administrator and polled individually during this
portion of the conference. Media and other interested people may listen to the
live broadcast at www.catalystpaper.com/conferencecall.asp.

    About Catalyst Paper

    Catalyst is a leading producer of mechanical printing papers in North
America, headquartered in Richmond, British Columbia. The company also
produces market kraft pulp and owns western Canada's largest paper recycling
facility. With five mills at sites within a 160-kilometre radius on the south
coast of BC, Catalyst Paper has a combined annual capacity of 2.4 million
tonnes of product. Catalyst's common shares trade on the Toronto Stock
Exchange under the symbol CTL.

    Forward-Looking Statements

    Certain of the matters set forth in this news release including
statements with respect to the anticipated acquisition of the Snowflake mill,
production capacity, the achievement of synergies, cost reductions and
business efficiencies which may result from the acquisition of the Snowflake
mill and the completion of the proposed rights offering are forward looking
statements and are subject to risks and uncertainties that may cause such
transactions not to be completed or actual results to differ materially from
those contained in these statements. In particular, the closing of the
acquisition of the Snowflake mill is subject to the fulfilment of various
conditions beyond the control of Catalyst including the receipt of required
regulatory approvals and the successful completion of the proposed rights
offering.
    This press release does not constitute an offer to sell nor the
solicitation of an offer to purchase, the rights, subscription receipts or
common shares of Catalyst Paper. Any offer of these securities in Canada will
be made only by way of prospectus and in the United States will be made by way
of a registration statement that will be filed by Catalyst Paper with the
United States Securities and Exchange Commission. No offer to sell,
solicitation of an offer to purchase, or sale will be made in any jurisdiction
in which such offer, solicitation or sale would be unlawful.

    %SEDAR: 00000638E




For further information:

For further information: Investors: David Smales, Vice President,
Finance & Chief Financial Officer, (604) 247-4011; Media: Lyn Brown, Vice
President, Corporate Relations & Social Responsibility, (604) 247-4713

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Catalyst Paper Corporation

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