Weston Presidio to Take Cellu Tissue Holdings Public This Week

Jan.21.10 | About: Cellu Tissue (CLU)

Cellu Tissue Holdings (CLU), a North American manufacturer of private label tissue products, is expected to float its IPO this week. According to the Daily Deal: "Boston private equity firm Weston Presidio Management Co. stands to nearly quintuple its money after taking Cellu Tissue Holdings Inc. public."

Business Overview (from prospectus):

We are a North American producer of tissue products, with a strategic focus on consumer-oriented private label tissue products and a growing presence in the value retail tissue market. We manufacture large rolls of tissue, which we refer to as hardrolls, from purchased pulp and our own recycled fiber. We are a vertically integrated manufacturer, which means that we convert some of the hardrolls we produce into finished and packaged tissue products, and we sell the remainder of our hardrolls to third-party converters of tissue products. Our vertically integrated manufacturing operations and extensive geographic footprint enable us to deliver a broad range of cost-competitive products with brand-like quality manufactured to our customers’ specifications.

Offering: 7.8 million shares at $15 - $17 per share. Net proceeds of approximately $29.4 million will be used to repay debt.

Lead Underwriters: Goldman Sachs (NYSE:GS), J.P. Morgan (NYSE:JPM), BofA Merrill Lynch (NYSE:BAC)

Financial Highlights:

Three Months Ended November 26, 2009 (the fiscal 2010 three-month period) compared to the Three Months Ended November 27, 2008 (the fiscal 2009 three-month period): Consolidated net sales for the fiscal 2010 three-month period decreased $12.9 million, or 9.0%, to $130.1 million from $143.0 million for the comparable prior year period... Consolidated gross profit was $20.3 million for the fiscal 2010 three-month period or an increase of $4.2 million from $16.1 million in the comparable prior year period... Selling, general and administrative expenses were $5.0 million for the three months ended November 26, 2009 compared to $5.5 million for the comparable three-month period in fiscal 2009.

Competition:

The hardroll tissue market and consumer and away-from-home converted tissue products market are highly competitive and are led by a number of large, international companies, such as Kimberly-Clark, Georgia-Pacific, SCA and Proctor & Gamble, as well as smaller, regional companies, such as Cascades, Irving, Stefco, Orchids, Royal and Clearwater Paper Corporation. Among the value retailers there is a growing trend towards branded-quality private label converted products. Our primary focus since 2005 has been on delivering branded-quality private label converted products to this fast growing value retail market. We believe these retailers, which are primarily based east of the Mississippi, see us as consistently delivering branded-quality converted products due to our vertical integration and the geographic locations of our converting facilities.

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