Merger of Norbord and Ainsworth Creating a Leading Global OSB - - PowerPoint PPT Presentation

Merger of Norbord and Ainsworth

Creating a Leading Global OSB Company

December 8, 2014

Forward-Looking Statements and Non-IFRS Financial Information

• All financial references are expressed in US$ unless otherwise noted
• Financial numbers have been prepared in accordance with IFRS
• This presentation contains forward-looking statements and estimates
• Actual company results could differ materially from a conclusion, forecast or projection in the

forward-looking information

• Certain material factors or assumptions were applied in drawing a conclusion or making a

forecast or projection as reflected in the forward-looking information

• Additional information can be found in Norbord's and Ainsworth's annual information forms,

annual and quarterly MD&A, and on Norbord’s and Ainsworth's websites (www.norbord.com; www.ainsworthengineered.com) about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information, and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information

• During the course of this presentation, certain non-IFRS financial information will be
• presented. Definitions and reconciliation of terms can be found in Norbord's and Ainsworth's

December 8, 2014 joint press release announcing the transaction

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– 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Combined Company Louisiana-Pacific Georgia-Pacific Norbord Weyerhaeuser Ainsworth Huber Tolko Kronospan Kronoswiss Martco Total OSB Capacity (Bsf-3/8") – $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 West Fraser Canfor Combined Company Louisiana-Pacific Norbord Interfor Western Forest Ainsworth Conifex Enterprise Value (US$mm)

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Pro Forma Top 10 Global OSB Producers Pro Forma Enterprise Value

• Norbord and Ainsworth to merge in an all-share transaction

Creating a Leading Global OSB Company

Source: Company filings (1) Ainsworth and combined company enterprise values calculated using Norbord's December 5, 2014 closing price of C$23.96 and the 0.1321 exchange ratio

(1) (1)

Transaction Overview

• Ainsworth shareholders will receive 0.1321 of a Norbord share for each Ainsworth share
• Represents a 15.0%

(1) premium to Ainsworth's 20-day volume weighted average price as

• f December 5, 2014
• Subject to approval by majority of the minority shareholders of both Ainsworth and Norbord as

well as customary closing conditions

• Transaction not reportable under U.S. Hart-Scott-Rodino Act or the Canadian Competition Act

due to common controlling shareholder, however U.S. and Canadian antitrust and competition authorities may review non-reportable transactions at their discretion

• Circular will be mailed to Norbord and Ainsworth shareholders in late December, with

shareholder meetings / votes expected in January 2015

• Transaction is expected to close in the first quarter of 2015

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(1) Based on trading on all Canadian exchanges. Norbord's share prices prior to November 27, 2014 (December ex-dividend date) have been adjusted to exclude the December dividend payment of C$0.60

Additional Transaction Details

• Proposed merger unanimously approved by both Norbord's and Ainsworth's Boards of

Directors

• Both Boards recommend shareholders vote in favour of the transaction
• Transaction negotiated by Independent Committees of both Boards
• Neither Independent Committee included representatives of Brookfield Asset

Management ("Brookfield")

• Brookfield (controls approximately 52% and 55% of Norbord and Ainsworth shares,

respectively) has entered into voting support agreements for transaction

• Brookfield will own approximately 53% of Norbord following close of transaction
• Board of Directors of the combined company will have equal representation of independent

directors from the current Boards of Norbord and Ainsworth, with a majority of the Board comprised of directors who are not Brookfield nominees

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Strategic Rationale

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• Geographically complementary operations with a balanced portfolio of high-

quality assets

• Enhanced market diversification
• Strong financial position
• Growth potential
• Improved capital markets presence
• Significant synergies
• Experienced leadership

Name Location Capacity Ainsworth OSB 100 Mile House British Columbia 440 Barwick Ontario 510 Grande Prairie Alberta 730 High Level Alberta 860 Norbord OSB Bemidji Minnesota 470 Cordele Georgia 990 Genk Belgium 350 Guntown Mississippi 450 Huguley Alabama 500 Inverness Scotland 350 Jefferson Texas 415 Joanna South Carolina 500 La Sarre Quebec 375 Nacogdoches Texas 380 Val-d'Or Quebec 340 Total OSB Capacity 7,660 Particleboard Cowie Scotland 380 South Molton England 160 MDF Cowie Scotland 380 Total Panel Capacity 8,580

Geographically Complementary Operations Balanced Portfolio of High-Quality Assets

• Combination of Norbord's low-cost operations and larger mill network with Ainsworth's

innovation in value-added strand-based engineered wood products

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* Denotes curtailed mills (1) In million square feet (MMsf-3/8"). Grande Prairie capacity does not include the 600 MMsf GP2 expansion project, which has an expected completion cost of C$80 million (2) Operating OSB capacity: 6,820 MMsf-3/8". Operating panel capacity: 7,740 MMsf-3/8"

Bemidji, MN Barwick, ON La Sarre, QC Val-d'Or, QC 100 Mile House, BC Cordele, GA Joanna, SC Huguley, AL Guntown, MS Nacogdoches, TX Jefferson, TX High Level, AB Grande Prairie, AB

European Operations

Genk, Belgium South Molton, England Cowie, Scotland Inverness, Scotland

North American Operations Overview of Combined Assets

Norbord Mills Ainsworth Mills

(1)

* *

(2) (2)

North America: 64% Europe: 31% Asia: 5%

Enhanced Market Diversification

• Strong North American footprint combined with more stable margin European
• perations of Norbord and Asia-focused export business of Ainsworth
• Combined company has a significant presence in North America, Europe and Asia

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(1) Based on reported LTM revenues as of Q3 2014 (2) Ainsworth sales converted to US$ at an LTM average exchange rate of C$1.07 / US$

North America: 58% Europe: 42%

Norbord Sales by Geography(1) Combined Company Sales by Geography(1)(2)

Asia: 18%

Ainsworth Sales by Geography(1)

North America: 82%

Q3 - 2014

Combined

(US$ millions)

Norbord Ainsworth Company LTM Sales $1,218 $416 $1,634 LTM Adjusted EBITDA $104 $33 $143 Market Capitalization $1,120 $668 $1,788 Debt $440 $315 $755 Cash $54 $88 $142 Net Debt $386 $227 $613 Enterprise Value $1,506 $895 $2,401

Strong Financial Position

Disciplined Capital Allocation

• Maintain financial flexibility with

strong balance sheet and credit profile

• Significant capital base will facilitate

capital reinvestment, new product development and expansion projects in new and existing markets

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Selected Financial Information(1)

Dividend Policy

• Anticipated that the Board of Directors of the combined company will continue Norbord's

dividend policy which targets the payment to shareholders of a portion of free cash flow

• Taking into account growth and other attractive capital investment opportunities, and to

maintain flexibility in the company’s capital structure, the Board of Directors of Norbord expects to set the dividend at C$0.25 per common share in the first quarter of 2015

(1) Based on pro forma sales and adjusted EBITDA. Adjusted EBITDA defined as earnings before finance costs, FX loss, gain on derivative financial instrument, costs on early debt extinguishment, costs incurred on terminated Louisiana-Pacific acquisition, income tax and depreciation. Ainsworth sales and adjusted EBITDA converted at a period average exchange rate of C$1.07 / US$. Ainsworth cash and debt balances converted at a period end exchange rate of C$1.12 / US$ and do not reflect any pro forma adjustments. Market capitalizations converted at the December 5, 2014 exchange rate of C$1.14 / US$. Ainsworth market capitalization and enterprise value calculated using Norbord's December 5, 2014 closing price of C$23.96 and the 0.1321 exchange ratio

Other Benefits

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Improved capital markets presence

• Increased stock market liquidity and larger public float
• Pro forma market capitalization of approximately C$2.0

(1) billion

• Expected to continue in the S&P/TSX Composite Index

Experienced leadership

• Merged company to be led by Norbord's CEO, Peter Wijnbergen
• Draw upon extensive strategic, operating and financial experience

from both organizations, as well as Brookfield Growth potential

• Combined company will have several growth opportunities:

− Expansion of European OSB production − Restart of mothballed capacity (Huguley, AL and Val-d'Or, QC) − Completion of the second line at Grande Prairie, AB Significant synergies

• Estimated at $45 million/year, achievable over 18-24 months, from:

− Best practices and technology transfers − Sales & logistics improvements − Cost reductions

(1) Pro forma market capitalization calculated using Norbord's December 5, 2014 closing price of C$23.96 and the 0.1321 exchange ratio

0.5 1.0 1.5 2.0 2.5 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 U.S. Housing Starts (mm) U.S. Housing Starts Underlying Demand 21.4 22.8 24.0 24.8 25.9 26.9 28.0 28.6 29.2 28.4 27.8 27.1 26.9 27.1 28.0 28.3 28.5 28.7 29.2 30% 40% 50% 60% 70% 80% 90% 100% – 5.0 10.0 15.0 20.0 25.0 30.0 35.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Effective Demand / Capacity Capacity (Bsf-3/8") North American Effective Capacity Mothballed Capacity Effective Demand / Capacity

Well Positioned for U.S. Housing Market Recovery

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Source: FEA

1.5mm Over-Built 3.7mm Under-Built

North American OSB Demand and Capacity U.S. Housing Starts and Underlying Demand

Complementary Products and End-Users

• Combination of Norbord's low-cost operating expertise with Ainsworth's innovation in new

product development

• Combined company will have 50% of sales in value-added products and will be a significant

supplier to:

• Big Box (repair & remodel)
• Pro-Dealers (new home construction)
• Industrial (furniture, EWP)
• Export (Japan, China)

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Q&A