Rayonier Advanced Materials Reiterates Commitment to Acquire Tembec on Agreed Terms

Transaction provides compelling value to Tembec shareholders

JACKSONVILLE, Fla.–(BUSINESS WIRE)–Rayonier Advanced Materials Inc. (the “Company” or “Rayonier Advanced
Materials”) (NYSE: RYAM) today reaffirmed its commitment to acquire
Tembec Inc. (“Tembec”) (TSX: TMB) on the terms previously agreed with
Tembec. The Company believes that the previously announced arrangement
consideration of C$4.05 in cash or 0.2302 of a share of Rayonier
Advanced Materials common stock per Tembec common share—which is subject
to proration so that approximately 63% of the aggregate consideration is
paid in cash and 37% is paid in Rayonier Advanced Materials
stock—provides compelling value to Tembec shareholders. The Company does
not intend to increase the consideration offered to Tembec shareholders.

On July 14, 2017, the Company received a letter from Oaktree Capital
Management (”Oaktree”) indicating its intent to vote against the
Company’s acquisition of Tembec at the special meeting of Tembec
shareholders. Oaktree’s letter contains a number of misleading
statements, which we address in Appendix A. The Company believes that
the previously announced arrangement consideration, which was the result
of extensive negotiations with Tembec, represents a full and fair price
and an attractive valuation for the following reasons:

• Significant premium – The arrangement consideration represents
  a significant premium to Tembec’s historical share price. The headline
  offer price of C$4.05 and the current implied value of C$4.20 per
  Tembec share represent a 37% and 42% premium, respectively, to
  Tembec’s unaffected share price on May 24, 2017, and a 76% and 83%
  premium, respectively, to Tembec’s VWAP for the 12 months
  pre-announcement.
• Certainty of value – The cash component of the arrangement
  consideration represents approximately 63% of the current overall
  value of the arrangement consideration and provides a substantial and
  immediate value realization for Tembec shareholders.
• Upside participation – With approximately 37% of the
  consideration in the form of Rayonier Advanced Material stock, Tembec
  shareholders have the opportunity to capture enhanced long-term value
  prospects through ongoing participation in a larger, more diverse
  company.
• Enhanced liquidity – In the year prior to the announcement,
  Tembec common shares traded an average of $0.13 million per day. In
  contrast, Rayonier Advanced Materials shares traded an average of $7.8
  million per day in the same period, which means that the Company’s
  shares are greater than 60 times more liquid than Tembec shares. As
  part of a significantly larger company, Tembec shareholders receiving
  Rayonier Advanced Materials common stock will benefit from this
  significantly increased market liquidity.
• Full price discovery – Tembec’s Board of Directors and
  management, with the assistance of their financial and legal advisors,
  reviewed strategic alternatives for nearly two years, including the
  continuation of Tembec’s existing stand-alone business plan and the
  divestiture of core and non-core segments, before recognizing that a
  transaction with Rayonier Advanced Materials was the best option for
  Tembec and its shareholders. The interest of Tembec’s Board of
  Directors and management are fully aligned to that of shareholders,
  and Tembec’s Board received two fairness opinions to the effect that
  the transaction is fair.
• Optionality on superior offers – Tembec also retained the
  ability to engage in discussions with respect to an unsolicited
  competing offer that could reasonably be expected to be more favorable
  to Tembec shareholders, from a financial point of view, than the
  transaction with the Company. In the nearly two months since the
  arrangement agreement was announced, no third party has made such an
  offer.

Tembec’s Board of Directors unanimously approved the arrangement
agreement and recommended that its shareholders vote “FOR” the
arrangement. Institutional Shareholder Services (“ISS”), an independent
proxy voting and corporate governance advisory firm, also recommended
that Tembec shareholders vote “FOR” the arrangement with Rayonier
Advanced Materials, stating that “In light of the premium offer
consideration, the favorable market reaction and the sound strategic
rationale, shareholder approval of this arrangement is warranted.” The
research community also supports the transaction. For example, Bank of
America Merrill Lynch stated, “… RYAM is paying a sizable premium … and
could bring significant value to Tembec through its expertise in the
cellulose specialties business, potential for an improved capital
structure and more steady cash flow generation to invest in the
business, among others.” Similarly, TD Securities stated, “… we believe
that RYAM’s bid is fair.”

The Company believes that the agreed-upon consideration reflects the
significant value that can be created through a combination between the
two companies, but also the meaningful risks associated with Tembec’s
business segments, including:

• Commodity businesses – With the significant majority of
  Tembec’s revenue in commodity markets, including High-Yield Pulp,
  Newsprint and Forest Products, the agreed-upon price reflects the
  volatile nature of these businesses as they are currently operating
  above historical averages. In High-Yield pulp, there is 1.8 million
  ton expansion of the competitive BEK pulp coming on line in 2017, with
  other announced capacity expansions in Asia and South America to
  follow in 2018. Newsprint demand continues to decline by over 8% per
  year. Forest Products is driven by US and Canadian housing. These
  markets face threats from rising interest rates and trade disputes.
• Softwood Lumber tariffs – Tembec has a significant exposure in
  the developing trade tension between Canada and the United States with
  historical lumber export volumes in excess of 50%. Recently,
  approximately 27% tariffs were announced on lumber exported from
  Canada to the United States and the outlook of the negotiations is in
  flux given the change in administrations at each government. While
  prior tariff disputes were eventually settled after numerous years,
  there can be no assurances of a similar outcome.
• Currency – Nearly 50% of Tembec’s Canadian sales are
  denominated in US dollar with the majority of their production inputs
  in Canadian dollar. A stronger Canadian dollar can significantly
  affect Tembec’s cost position compared to foreign competitors. At the
  time of announcement, the Canadian dollar was trading below historic
  averages and, as expected, is reverting to more normal levels. One
  Canadian dollar was worth around 0.74 US dollars at the time of
  announcement. Since then, the Canadian dollar has appreciated by over
  6%. Based on Tembec’s disclosure, a 1% change in Canadian dollar
  impacts EBITDA by C$7 million; resulting in a potential reduction in
  EBITDA of C$43 million.
• Expense and risk to synergies – While the Company expects to
  achieve upwards of $50 million of synergies over the three years
  following the completion of the arrangement, it will also require
  considerable time, money and resources along with increased execution
  risk to capture these synergies. These synergies are a direct result
  of the combination and will only be achieved with careful investment
  and management.

Given the lengthy exploration of strategic alternatives that Tembec
undertook and the attractive premium and valuation offered by the
Company, a rejection of the offer exposes Tembec shareholders to
significant market valuation risk and diminished liquidity. Rayonier
Advanced Materials stock has benefited approximately 15% since the
announcement. With cash on hand equal to approximately 40% of the equity
market capitalization of the Company, much of this value was created by
providing clarity on the Company’s strategy. With over $345 million of
cash on hand and free cash flow generation of $90 to $100 million, the
Company also has significant capacity and ability to create shareholder
value through other strategic and financial alternatives. The Company
has successfully implemented a four pillar approach to driving value,
focused on cost improvements, new product development, optimizing
existing markets and executing on complementary acquisitions. The
Company continues to evaluate other opportunities independent of its
acquisition of Tembec and believes that it has various strategic
alternatives, including or excluding Tembec.

Rayonier Advanced Materials believes that its acquisition of Tembec is
in the best interests of both companies and their shareholders and
reaffirms its commitment to acquire Tembec on the previously announced
terms.

About Rayonier Advanced Materials

Rayonier Advanced Materials is a leading global supplier of high
purity cellulose, a natural polymer commonly found in cell phones,
computer screens, filters and pharmaceuticals. The company engineers
dozens of customized products at its plants in Florida and Georgia,
delivering unique properties, unparalleled consistency and exceptional
quality. Rayonier Advanced Materials’ facilities can produce
approximately 485,000 tons of high purity cellulose and 245,000 tons of
commodity products. With approximately 1,200 employees and revenues of
US$870 million Rayonier Advanced Materials is routinely ranked among the
nation’s top 50 exporters, shipping products to five continents, 35
countries and 80 ports around the world. More information is available
at www.rayonieram.com.

About Tembec

Tembec is a manufacturer of forest products – lumber, paper, pulp and
high purity cellulose – and a global leader in sustainable forest
management practices. Principal operations are in Canada and France.
Tembec has approximately 3,000 employees and annual sales of
approximately C$1.5 billion. Tembec is listed on the Toronto Stock
Exchange (TMB). More information is available at www.tembec.com.

Forward-Looking Statements

This document contains statements that are forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. All
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
those projected. Such risks and uncertainties include, but are not
limited to: the timing of the closing of the transaction; whether a
transaction will be consummated at all and the ability to obtain
required regulatory approvals and satisfy the other conditions to
closing the transaction; the expected benefits of the transaction and
whether such benefits will be achieved on a timely basis or at all; our
ability to successfully integrate acquired businesses; prolonged
weakness in general economic conditions; unfavorable weather conditions
or natural disasters; our reliance on government permits or approvals;
risks related to federal, state, local and foreign government laws,
rules and regulations; risks related to our reliance on information
technology; manufacturing issues that may arise; adverse consequences of
current or future legal claims; our ability to hire and retain a
sufficient seasonal workforce; risks related to our workforce, including
increased labor costs; loss of key personnel; fluctuations in foreign
currency exchange rates; impairments or write downs of our assets;
changes in accounting estimates and judgments, accounting principles,
policies or guidelines; a materially adverse change in our financial
condition; and other risks detailed in Rayonier Advanced Materials’
filings with the U.S. Securities and Exchange Commission, including the
“Risk Factors” section of Rayonier Advanced Materials’ Annual Report on
Form 10-K for the fiscal year ended December 31, 2016 and in Tembec’s
filings with the Canadian Securities Administrators, including the “Risk
Factors” section of Tembec’s Annual Information Form for the fiscal year
ended September 30, 2016. All forward-looking statements attributable to
us or any persons acting on our behalf are expressly qualified in their
entirety by these cautionary statements. All forward-looking statements
in this document are made as of the date hereof and we do not undertake
any obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise, except as may be
required by law.

Additional Information

Further information regarding the transaction is contained in the
management information circular in connection with the special meeting
of the Tembec shareholders filed by Tembec with the Canadian Securities
Administrators on June 23, 2017 and furnished by Rayonier Advanced
Materials on Form 8-K filed June 23, 2017 with the U.S. Securities and
Exchange Commission. Investors and security holders are urged to read
the information circular, as it contains important information
concerning the proposed transaction. Investors and security holders may
obtain a copy of the arrangement agreement, information circular and
other meeting materials at www.sec.gov
and www.sedar.com.
This document is for informational purposes only. It does not constitute
an offer to purchase shares of Rayonier Advanced Materials or Tembec or
a solicitation or recommendation statement under the rules and
regulations of the Canadian securities regulators, the U.S. Securities
and Exchange Commission or other applicable laws.

APPENDIX A

Rayonier Advanced Materials Response to Oaktree’s False and
Misleading Assertions

Oaktree Misleading Statement: “Oaktree recognizes the
strategic merit of the combination, yet Tembec shareholders are not
receiving fair consideration for the value created by the combination”

The Facts:

• Rayonier Advanced Materials believes that Tembec shareholders are
  receiving full and fair consideration for their Tembec shares and an
  appropriate share of the incremental value created by the combination
• The purchase price represents a significant premium to Tembec’s
  historical trading levels
  • Headline offer price of C$4.05 per Tembec share represents a
    premium of:
    • 37% to Tembec’s unaffected share price of C$2.95 on May 24,
      2017
    • 76% to Tembec’s VWAP for the 12 months pre-announcement of
      C$2.30
  • Current implied value of C$4.20 per Tembec share represents a
    premium of:
    • 42% to Tembec’s unaffected share price of C$2.95 on May 24,
      2017
    • 83% to Tembec’s VWAP for the 12 months pre-announcement of
      C$2.30
• Rayonier Advanced Materials’ perspective is also supported by:
  • The market:
    • Rayonier Advanced Materials’ stock price is up 15% since the
      day prior to announcement, while Tembec stock is up 42% or
      nearly 3x the appreciation realized by Rayonier Advanced
      Materials shareholder
  • The research community:
    • BofA Merrill Lynch: “We believe RYAM is paying a
      fair price for Tembec considering its different
      product lines (i.e. challenges in newsprint, potential
      headwinds in lumber from the US softwood lumber trade case),
      the cash cost position of its mills and other risks associated
      with the business. Additionally, we note that RYAM is
      paying a sizable premium….and could bring significant
      value to Tembec through its expertise in the cellulose
      specialties business, potential for an improved capital
      structure and more steady cash flow generation to invest in
      the business, among others.”
    • TD Securities: The purchase price represents “a modest
      discount to the global pulp sector average…arguably reflecting
      Tembec’s small scale and inconsistent performance from the
      Company’s sawmills / BCTMP pulp assets…we believe that
      RYAM’s bid is fair.”
  • Independent shareholder advisors:
    • Institutional Shareholder Services (ISS): “The proposed premium
      offer consideration provides shareholders with
      flexibility to participate in the growth opportunities
      associated with the combined business of increased size, scale
      and liquidity and/or to receive the consideration in the form
      of cash that provides immediate liquidity (subject to
      proration limits). In light of the premium offer
      consideration, the favorable market reaction and the sound
      strategic rationale, shareholder approval of this arrangement
      is warranted.”
• The board of directors of Tembec:
  • “The board of directors of Tembec (the “Board”) has unanimously
    determined that the Arrangement is in the best interests of Tembec.
    The Board has unanimously approved the Arrangement and recommends
    (without any abstention) that Tembec shareholders vote FOR the
    Arrangement Resolution.”

Oaktree Misleading Statement: “Rayonier has a variety of
levers available to it to improve its offer for Tembec”

The Facts:

• Rayonier Advanced Materials’ approach to M&A focuses on intrinsic
  value and long-term shareholder returns rather than premiums,
  multiples or near-term share price movements

• This analysis:
  • Is based on the Company’s risk-adjusted outlook for the business,
    inclusive of combination synergies and other opportunities,
    relative to the cost of capital
  • Anchors the indifference point for the Company with respect to a
    transaction involving Tembec
• Through extensive negotiations with Tembec, Rayonier Advanced
  Materials has already been pushed to the limits of its willingness to
  pay
  • Mid-February 2017: Offered C$3.15 per Tembec share
  • February 27, 2017: Increased its offer to C$3.70 per Tembec share
  • March 14, 2017: Increased its offer to C$4.00 per Tembec share
  • May 19, 2017: Increased its offer to C$4.05 per Tembec share,
    representing an increase of 29% relative to its initial offer

Oaktree Misleading Statement: “Tembec could generate more
shareholder value as a stand-alone entity.”

The Facts:

• Tembec’s stand-alone business is subject to significant risks and
  challenges, including:
  • Exposure to commodity-oriented segments (e.g. newsprint, high
    yield pulp, lumber) with challenging cyclical and secular
    fundamentals
  • Cyclicality in paper and a paperboard pricing, where a $50 per
    tonne reduction in pricing would decrease EBITDA by approximately
    C$18 million
  • Foreign exchange exposure, where a 10% strengthening of the CAD /
    USD would decrease EBITDA by ~C$70 million (note that the CAD has
    strengthened by 6.1% since announcement, implying a potential
    ~C$43 million impact on EBITDA)
  • The current tariffs on softwood lumber imports into the US and the
    terms of a new Softwood Lumber Agreement could materially impact
    EBITDA.
  • The need for significant capital investment in Tembec’s sawmills,
    as the mills have seen significantly underinvestment over the last
    ten years
• The transaction with Rayonier Advanced Materials arose out of a
  comprehensive and rigorous process conducted by Tembec over a period
  of nearly two years to seek alternative transactions involving a sale
  of the whole or any part of the Company
  • The board of directors of Tembec considered, among other
    alternatives, “the continuation of Tembec’s existing stand-alone
    business plan and a strategic repositioning
    of Tembec, cost reduction plans, potential asset combinations
    of Tembec’s forest products, newsprint and/or specialty pulp
    businesses with other industry players, the possible divestiture
    of certain of Tembec’s core and non-core business segments”
  • Pursued a sale of the forest products business
  • Pursued a sale of the core specialty pulp facilities in
    Temiscaming and Tartas, including contacting eleven parties and
    providing a confidential information memorandum to eight
    interested parties
• Over the two-year period that the board of directors of Tembec pursued
  the above alternatives:
  • Tembec’s financial results fluctuated significantly
  • Tembec’s stock price never closed higher than C$3.02 per share
    with an average closing price of $C1.54 during the period
  • Shareholders had extremely limited liquidity, with average daily
    trading volume in Tembec stock of only ~56,000 shares or ~C$86,000
    of value
• Considering all risks, opportunities and alternatives, the board of
  directors of Tembec concluded that a transaction with Rayonier
  Advanced Materials offered the best opportunity to generate
  shareholder value

Oaktree Misleading Statement: “Stand-alone RYAM, on the other
hand, has a significantly more difficult outlook.”

The Facts:

• While we continue to see strong strategic merit in a combination with
  Tembec, stand-alone Rayonier Advanced Materials has a broad range of
  alternatives to create shareholder value, starting with the Company’s
  Four Pillar strategy:
  • Cost Transformation to rapidly re-shape the business
  • Market Optimization to maximize earnings from
    optimum product and market mix
  • A deep pipeline of New Products and customer-valued
    service offerings
  • An established Acquisition program to create a
    diversified and faster growing business through complementary
    combinations
• Importantly, the Company has significant financial flexibility to
  pursue alternatives:
  • $345 million of available cash and $574 million of total
    liquidity, including $229 million available under the revolving
    credit facility as of March 25, 2017
  • Conservative leverage of 2x Net Debt / LTM EBITDA as of March 25,
    2017
• The research community also acknowledges the range of alternatives:
  • BofA Merrill Lynch: “While RYAM could adjust terms of this
    transaction, we also believe other acquisitions may make
    sense if this deal were to fall through as RYAM has been
    actively pursuing M&A as part of its long-term strategy”

Oaktree Misleading Statement: “Tembec Has Created Confusion in
the Marketplace Regarding Shareholder Support for the Transaction”

The Facts:

• Rayonier Advanced Materials was encouraged by the strong support of
  Fairfax Financial for the transaction

• As one of Tembec’s largest and most sophisticated shareholders, their
  support was a strong endorsement of the superior value offered by RYAM
• Oaktree doubled its stake in Tembec after the announcement of the
  acquisition apparently to leverage an opportunity to extract
  incremental value not warranted by economic fundamentals by
  threatening the completion of the transaction.

Contacts

Rayonier Advanced Materials
Media
Ryan
Houck, 904-357-9134
[email protected]
or
Investors
Mickey
Walsh, 904-357-9162
[email protected]
or
Tembec
Media
Linda
Coates, 416-775-2819
[email protected]
or
Investors
Michel
Dumas, 819-627-4268
[email protected]