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Société générale de financement du Québec starts a process to disinvest in Domtar

Montréal, December 10, 2002 - Claude Blanchet, President and Chief Executive Officer of the Société générale de financement du Québec (SGF), announced that "Today SGF’s Board of Directors decided to divest itself of the block of 16% of the outstanding Domtar shares which SGF holds through a wholly-owned subsidiary of SGF REXFOR.


"We hold 36.3 million Domtar shares, said Blanchet, and we think that after 21 years of investing in the company’s capital stock, SGF has achieved its development and consolidation mission. It is also clear, added the President, that this transaction will benefit our shareholder and thus indirectly all Quebecers."


SGF and Domtar have signed an agreement with a syndicate of underwriters led by National Bank Financial Inc., CIBC World Markets Inc. and Merrill Lynch Canada Inc.


This agreement covers the sale by underwriting of 18.2 million units, each of which comprises one Domtar Inc. common share and one subscription right to purchase one Domtar share at $17.55 at any time up to one year after the transaction closing date. The price of each unit is $16.50. The units will be offered simultaneously in Canada and the United States, and Domtar will file a simplified prospectus in the applicable jurisdictions. An application has been made to allow the subscription right to be traded on the Toronto Stock Exchange.


"The net proceeds of this transaction, explained SGF President Claude Blanchet, is in the neighbourhood of $606.7 million, assuming that all the subscription warrants are exercised, and the net profit is of $180 million."


Since SGF’s first $145.8 million investment in Domtar in 1981, it has participated in subsequent rounds of financing, to the tune of $36.6 million in 1992 which increased its equity to 24.4%, and then $36.5 million in convertible debentures in 1993. In 2001 SGF invested $92 million in Domtar but sold off 8 million shares in 2002, realizing a net gain of $48 million.


To review the history of SGF’s investments in Domtar, when SGF first invested in Domtar in 1981, the company was going through a difficult period in a depressed market. The severe recession from 1981 to 1984 affected all of Domtar’s commercial operations, and resulted in the closure of some of its plants. But in 1984 Domtar worked its way up into the ranks of leading Canadian companies, especially with the modernization of its fine paper plant in Windsor, Québec. This project, estimated to cost over $1 billion, could not have been done without SGF and the Caisse de Dépôt.


During the recession in the early 1990s, SGF again supported the company in its restructuring program. But after 1996, Domtar’s progress never faltered, making it one of the jewels of the Quebec economy, especially with the creation in 1997 of Norampac, the largest producer of containerboard and corrugated board in Canada, the acquisition of E.B. Eddy in 1998 and of four U.S. plants in 2001.


"At a time when our relationship is taking a new direction, concluded SGF President, I wish to emphasize how successful the Domtar management team has been in adapting the company to meet the challenges of the modern, global economy and to congratulate all the employees on their performance. SGF is proud to have been able to contribute for so many years to this major economic and human success story that propelled Domtar into the ranks of the leading paper producers on this continent."


The mission of the Société générale de financement du Québec (SGF) is to carry out economic development projects in cooperation with partners and in accordance with accepted requirements for profitability. Since it was restructured in 1998, SGF has generated investments of over $10.1 billion and created more than 55,000 direct and indirect jobs. As of December 31, 2001, SGF’s consolidated assets totaled over $3 billion. SGF has 63 international partners operating in Québec. (sgfqc.com)


A registration statement relating to these securities has been filed with the U.S Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such State. A written prospectus meeting the requirements of Section 10 of the U.S Securities Act of 1933 may be obtained from Putnam Lovell NBF. A copy of the Canadian prospectus may be obtained from National Bank Financial, 1155 Metcalfe Street, 5th floor, Montreal, Quebec H3B 4S9
(telephone: )




Source :


Jean-Yves Duthel
Communications and public relations

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