Tembec's sale of its French mills is good news for the company

Tembec will be able to reduce its debt and better ride the current wave of rising global pulp prices by selling two of its pulp mills in France.

The sale of the mills in Tarascon and St-Gaudens to Paper Excellence BV is valued at C$137 million in shares and assumption of debt.

Pulp prices have been increases since the earthquake in Chile and a strike by the dock workers in Finland stopped production at several pulp mills.

Paul Quinn, an industry analyst from RBC Capital Markets, said Tembec may now just "sit on lower debt and just take advantage of the markets right now because pulp markets are extremely hot".

Quinn is also looking at a potential increase in the demand for lumber. U.S. housing starts exceeded expectations with an 8.2 per cent pickup in February.

Quinn believes Tembec could exit France altogether and focus entirely on North America if it gets the right price for the remaining asset.

The sale of European operations aren't part of the company's plans to sell about $70 million of assets this year. They include the company's turboprop airplane, hydroelectric facilities, buildings and some lands.

Read more:

Sale of French mills expected to allow Tembec to ride pulp price wave (The Canadian Press)