Domtar to Create Largest Fine Paper Company in North America Through Combination With Weyerhaeuser's Fine Paper Business

Montreal, Quebec (ots/PRNewswire) -

- Enterprise Value of New Company to Exceed US$6 billion - The
"New Domtar" to be Led by Domtar's Current President and CEO, Raymond
Royer - Head Office in Montréal, Quebec; Headquarters of Operations
in Fort Mill, South Carolina

Domtar Inc. (TSX/NYSE: DTC) today announced the creation of the
largest manufacturer and marketer of uncoated freesheet paper in
North America and the second largest in the world. Domtar has signed
a definitive agreement to combine with Weyerhaeuser's (NYSE: WY)
fine paper business and related assets. The new company, to be
called Domtar, will have its Head Office in Montréal, Quebec, while
the Headquarters of Operations will be in Fort Mill, South Carolina.
The transaction has been approved by the Boards of Directors of both
companies. "With this transaction, we are transforming Domtar into
one of the world's leading paper companies, presenting shareholders
with new opportunities and creating a stronger company for employees
and customers," said Raymond Royer, Domtar's President and Chief
Executive Officer, who will lead the new company in the same
capacity. "We are proactively enhancing the quality of our asset mix
and taking decisive action to assure our future in a consolidating
industry. In addition to more than doubling Domtar's current paper
production capacity, this compelling strategic and operational fit
will make the new company financially stronger with prominent brands,
a lower cost base and the necessary scale and scope to succeed in
the highly competitive global marketplace", added Mr. Royer. Based
on annualized Q2 2006 unaudited results for Domtar (excluding
Norampac) and for Weyerhaeuser's fine paper business, Domtar
estimates the new company would generate approximately US$6.5
billion in sales and US$730 million in EBITDA, before synergies. The
new company will have an enterprise value exceeding US$6 billion.

The "New Domtar"

The backbone of the new company will be six highly efficient
world-class uncoated freesheet mills that will provide two-thirds of
its more than five million tons of capacity. These mills, combined
with a solid mix of specialty facilities, will make the new company
one of the most efficient and cost-competitive paper companies in
North America. The company will have an expanded North American reach
and a wide range of well-known business and commercial printing paper
brands. With greater access to volume, increased depth of product
offerings, and better service through a wider geographic footprint,
the company will be in a position to meet the needs of large and
small customers alike throughout Canada and the United States. It
will maintain the environmental leadership shown by both Domtar and
Weyerhaeuser, notably through added capacity to expand its
environmentally and socially responsible papers such as the
EarthChoice(R) product line. (For more details on the new company see
the "Fact Sheet" issued with this news release.)

Leadership Team

Mr. Royer, as President and CEO, will lead an organization of
nearly 14,000 employees with a management team composed of executives
from Domtar and Weyerhaeuser paper operations. This team includes
Marvin Cooper, currently Weyerhaeuser's Senior Vice-President,
Cellulose Fiber & White Paper, Containerboard Manufacturing and
Engineering, who will become Chief Operating Officer of the new
company. Domtar's current Senior Vice-President and Chief Financial
Officer, Daniel Buron, will be the Chief Financial Officer. Harold
MacKay, counsel and former chairman and senior partner at the Regina,
Canada-based law firm of MacPherson Leslie and Tyerman LLP, and an
international advisor to Weyerhaeuser's Board of Directors, will
become non-executive Chairman of the new company's 13-member Board of
Directors - seven of whom will be nominated by Weyerhaeuser and six
by Domtar. Mr. MacKay will resign his Weyerhaeuser advisory role
before becoming Chairman of the "new Domtar".

Synergies

It is anticipated that the new company will achieve approximately
US$200 million in annualized synergies within two years, created by a
combination of process optimization resulting in lower operating
costs, reductions in transportation, logistics and purchasing costs,
implementation of best-in-class business practices and sales and
administrative cost reductions. The cost to implement these synergies
is anticipated to be approximately US$100 million.

Transaction Structure

Under the terms of the transaction, which is structured as a
"Reverse Morris Trust", Weyerhaeuser's fine paper business,
consisting of 10 primary pulp and paper mills (seven in the United
States and three in Canada), converting, forming and warehousing
facilities and two sawmills will be transferred into a newly formed
company for stock and a cash payment of US$1.35 billion to be
provided by the new company through borrowings under a credit
facility. Weyerhaeuser will distribute the shares of the new company
to its shareholders in either a spin-off or split-off transaction at
its own discretion. (A spin-off would provide a pro-rata distribution
of shares to Weyerhaeuser shareholders. A split-off would allow
Weyerhaeuser shareholders the opportunity to exchange Weyerhaeuser
shares for stock in the new paper business.) Domtar will combine with
the newly formed company to create the "new Domtar". The combination
will take place under a Plan of Arrangement. Under the Plan of
Arrangement:

1. All shares of Domtar will be automatically exchanged - on a
one-for- one basis - for common shares of a Canadian subsidiary of
the "new Domtar". 2. Following that, Domtar shareholders who are
taxable Canadian residents can either exchange these shares for
common shares in the "new Domtar" (which will be traded on the New
York Stock Exchange and on the Toronto Stock Exchange) or they can
receive the "new Domtar" Canadian subsidiary exchangeable shares
(which will be traded on the Toronto Stock Exchange). The
exchangeable shares are the economic equivalent of the common shares
of the "new Domtar", with equal dividend entitlement and voting
rights at the level of the "new Domtar". The exchangeable shares are
exchangeable at any time at the option of the holder into the "new
Domtar" common shares on a one-for- one basis. 3. For taxable
Canadian residents who choose the exchangeable shares, the
transaction will be tax deferred. However, if they select to receive
shares directly in the "new Domtar", the transaction is taxable. 4.
Non-Canadian residents who are Domtar shareholders will automatically
receive common shares in the "new Domtar" and for them the
transaction will be taxable. 5. The transaction is expected to be tax
deferred to all U.S. holders of Weyerhaeuser shares.

At the time of the closing, the combined company will be owned
approximately 55% by former Weyerhaeuser shareholders and 45% by
former Domtar shareholders. The combination is subject to approvals
by the shareholders of Domtar by a special resolution, the Superior
Court of Quebec, appropriate regulatory and other authorities, as
well as customary closing conditions. The transaction is expected to
close in the first quarter of 2007. Domtar and Weyerhaeuser will
continue to operate separately until the transaction closes.
Applications will be made to list the shares of the "new Domtar" on
the New York Stock Exchange and on the Toronto Stock Exchange, and
the exchangeable shares on the Toronto Stock Exchange. In due course,
information relating to this transaction, including Domtar's
Management Proxy Circular in connection with the anticipated Special
Meeting of Domtar shareholders to be convened to consider the
transaction, will be prepared and distributed to holders of Domtar's
common and preferred shares. Special Meeting and record dates will be
announced later. Domtar's financial advisors in this transaction are
J.P. Morgan Securities Inc. and RBC Dominion Securities Inc., and its
legal advisers are Debevoise & Plimpton LLP and Ogilvy Renault LLP.

Joint Financial Analysts Conference Call Information

Domtar and Weyerhaeuser will hold a live conference call with
financial analysts at 9:30 a.m. Eastern (6:30 a.m. Pacific) today,
August 23, to discuss this announcement. Financial analysts are
invited to participate in the call by dialing 1-888-221-5699 at least
15 minutes before the call. Those calling from outside North America
should dial 1-706-643-3795. Replays will be available for one week at
1-800-642-1687 (access code - 4924122) from within North America and
at 1-706-645-9291 (access code - 4924122) from outside North America.
Media and other interested individuals are invited to listen to the
live broadcast on the Domtar corporate website at
http://www.domtar.com./

Caution Concerning Forward-Looking Statements and Unaudited
Financial Statements

Financial information contained in this press release reflecting
the combination of Domtar and Weyerhaeuser's fine paper business and
related assets is based on unaudited "carve out" financial statements
of Weyerhaeuser's fine paper business and related assets as financial
statements historically have not been prepared for Weyerhaeuser's
fine paper business and related assets. Such "carve out" financial
statements were derived from historical accounting records of
Weyerhaeuser. The historical operating results and cash flows of
Weyerhaeuser's fine paper business and related assets may not be
indicative of what they would have been had such business been a
stand-alone entity, nor are they necessarily indicative of what the
future operating results and cash flows of such business may be in
the future. Audited "carve out" financial statements of
Weyerhaeuser's fine paper business and related assets for the years
ended December 31, 2005, 2004 and 2003 will be made available and
included in Domtar's Management Proxy Circular to be distributed to
Domtar's shareholders referred to above. There may be differences
between such audited financial statements and the unaudited financial
statements received by Domtar to date. This press release contains
forward-looking statements relating to trends in, or representing
management's beliefs about, Domtar's and the "new Domtar"'s future
growth, results of operations, performance and business prospects and
opportunities. These forward-looking statements are generally denoted
by the use of words such as "anticipate", "believe", "expect",
"intend", "aim", "target", "plan", "continue", "estimate", "may",
"will", "should" and similar expressions and include, but are not
limited to, statements about the anticipated benefits, savings and
synergies of the combination of Domtar and Weyerhaeuser's fine paper
business and related assets, including future financial and operating
results, the "new Domtar"'s plans, objectives, expectations and
intentions, the markets for the "new Domtar"'s products, the future
development of the "new Domtar"'s business, and the contingencies and
uncertainties to which the "new Domtar" may be subject and other
statements that are not historical facts. These statements reflect
management's current beliefs and are based on information currently
available to management. Forward-looking statements are necessarily
based upon a number of estimates and assumptions that, while
considered reasonable by management, are inherently subject to known
and unknown risks and uncertainties such as, but not limited to,
general economic and business conditions, product selling prices, raw
material and operating costs, changes in foreign currency exchange
rates, the ability to integrate acquired businesses into existing
operations, the ability to realize anticipated cost savings, the
performance of manufacturing operations and other factors referenced
herein and in Domtar's continuous disclosure filings. These factors
should be considered carefully and undue reliance should not be
placed on the forward-looking statements. Although the
forward-looking statements are based upon what management believes to
be reasonable estimates and assumptions, Domtar cannot ensure that
actual results will not be materially different from those expressed
or implied by these forward-looking statements. Unless specifically
required by law, none of Domtar, Weyerhaeuser or the "new Domtar"
assume any obligation to update or revise these forward-looking
statements to reflect new events or circumstances. These risks,
uncertainties and other factors include, among other things, those
discussed under "Risks and Uncertainties" in Domtar's Management's
Discussion and Analysis (MD&A) for the financial year ended December
31, 2005, and under "Risks and Uncertainties" in Domtar's MD&A for Q2
2006, as well as the risks of achieving the anticipated synergies and
the integration of the two businesses. There is no assurance the
transaction contemplated in this release will be completed at all, or
completed upon the same terms and conditions described.

About Domtar

Domtar is the third largest producer of uncoated freesheet paper
in North America. It is also a leading manufacturer of business
papers, commercial printing and publication papers, and technical and
specialty papers. Domtar manages according to internationally
recognized standards 18 million acres of forestland in Canada and the
United States, and produces lumber and other wood products. Domtar
has approximately 8,500 employees across North America. The company
also has a 50 percent investment in Norampac Inc., the largest
Canadian producer of containerboard.

A company fact sheet can be found at the following address:
http://files.newswire.ca/514/DOMfact.pdf >>

ots Originaltext: Domtar Inc.
Im Internet recherchierbar: http://www.presseportal.de

Contact:
For further information: For Media: François Taschereau,
+(514)-844-6665, Cellular: +(514)-594-1813,
francois.taschereau@edelman.com; For Investors: Pascal Bossé,
+(514)-848-5938, pascal.bosse@domtar.com