Upon hearing the name Amar Doman, you might expect the 38-year-old Vancouverite to be a major player in the forestry sector. He is, after all, the nephew of Herb Doman, who founded Doman Industries Ltd. and built it into a multimillion-dollar company before it collapsed into bankruptcy in 2002. But the younger Doman has no particular attachment to forestry (from an investment perspective, anyway), despite the fact the sector is where the family made its mark. “We see it as a sunset business,” he says. “We don’t see much future or profitability for that sector.”
Instead, Doman concentrates on a range of building-materials companies — manufacturers and distributors of flooring, roofing, adhesives and so on. Not exactly exciting, but profitable. His private investment firm, the Futura Corp., has major stakes in four public companies, along with numerous smaller holdings it isn’t obligated to disclose. Nor will Doman talk about them. But Futura’s investments generate more than $1 billion in revenue, he says, and as Futura’s sole owner, Doman has become a wealthy man.
That profitability isn’t coming as easily as it once did, however, since the construction slowdown in Canada and the U.S. is hitting some of Futura’s holdings. But that’s not exactly how Doman sees it. The downturn has made many companies remarkably cheap — and that bodes well for the acquisition-hungry Futura.
Doman wants to turn his firm into one of the largest building-products conglomerates in North America. His affinity for the sector is difficult for him to articulate, however. “When I look at building products, I don’t know how to describe it, but it’s just sort of, that’s what I should be doing,” he says. “I’ve been around lumber since I was a little kid, and I developed a passion for building materials. It’s in my blood.”
Doman’s father, Ted, started a lumber company out of Victoria in the mid-1970s called Futura Building Materials. Both Doman and his older brother, Rob, were recruited to work at a young age at the sawmill, and spent summers piling lumber, loading trucks and sweeping up. “Visiting our father and being there in summers and on weekends really whetted his appetite,” Rob says of his brother. Doman preferred the working world to a classroom. A self-confessed daydreamer during his school years, he couldn’t wait until they were over. He’s slightly appalled when asked if post-secondary education was ever an option. “Oh, God, no,” he says.
While his brother went on to earn a law degree, Doman started his first business immediately after graduating at 18. “My mom was horrified that I wasn’t going to go to school. She thought I was going to pile lumber for the rest of my life,” he says. But Doman ended up borrowing $10,000 from his mother to start First Class Lumber Remanufacturing. The company’s nine employees took lumber from mills and resized it for export, and Doman was able to pay back the loan within a year.
He purchased another remanufacturing company in 1989, and added several more firms to his roster over the next few years. He made his biggest acquisition with CanWel Building Materials Ltd. in 1999. Forestry firms Canfor Corp. and Weldwood of Canada Ltd. owned CanWel and were looking to sell the unprofitable joint venture. CanWel had actually been taken off the market because there had been no buyers by the time Doman became interested. He felt he could cut costs and turn the company around, and ended up purchasing it for an undisclosed amount. He then consolidated his various holdings under the umbrella of a new organization, the Futura Corp., in a nod to his father’s former lumber operation.
CanWel listed on the TSX in 2004, and converted to an income trust (TSX: CWX.UN) the following year. It reported sales of more than $860 million in 2007, but despite cost-cutting efforts, profit margins are razor thin. Net earnings totalled only $17.3 million that same year. CanWel is the main focus for Futura, which owns 42.89% of the firm, and Doman serves as chairman of the board. His brother, Rob, is corporate secretary. But the outlook for CanWel has dimmed somewhat. GMP Securities LP analyst Greg McLeish wrote in a recent report that the increasingly negative Canadian housing market will adversely affect CanWel, causing him to lower his rating on the units from Buy to Hold in November and adjust his 12-month target price to $2.40 from $5.
Other Futura holdings have had a rough year, as well. The firm has a 19.9% stake in wire-products manufacturer and distributor Tree Island Industries Ltd. that was worth more than $18 million at the beginning of the year, but has been cut in half as the unit price of Tree Island Wire Income Fund (TSX: TIL.UN) plummeted to around $2. It had been falling long before the current financial mess, however. Tree Island purchased two factories in China and a trading facility in California in 2007, which didn’t sit well with Doman.
“I disagreed with the lack of due diligence in the process, and I believe it was the wrong time to do an acquisition, right at the top of the market,” he says. Doman resigned from the board and launched a proxy contest in January to replace the trustees with a slate of his own choosing, criticizing management’s “flawed strategy and poor execution” for eroding unitholder value.
Tree Island fought back, accusing Futura of offering no alternative strategy and faulting Doman’s choice of trustees for being inexperienced. Management also slammed what it perceived to be Doman’s poor governance practices, particularly his $600,000 salary in 2006 for “part-time work” at CanWel, which is more than the salary of its CEO.
“Those [claims] were just trash, absolute trash,” Doman says today. “I’m involved in CanWel every single day.” But Tree Island management made a strong enough case that unitholders rejected Doman’s trustees in favour of the incumbents. Doman says he has no desire to join Tree Island’s board at this time (in fact, he was offered a spot and turned it down) and adds the relationship with management has improved. “They’ve done a lot of cost-cutting activities we’ve asked them to do, so we think they’re on the right track,” he says.
Tree Island CEO Daniel McAtee says relations are cordial. “There was probably a misunderstanding about our opportunities to expand internationally,” he says. The direction of the firm hasn’t changed since the proxy contest, and McAtee can’t name any particular suggestions from Futura. “Their involvement is extremely minimal,” he says.
Tree Island’s unit price is still falling, and building materials companies could have a tough time over the next few quarters, but Doman is not pessimistic. He plans to make more acquisitions over the next few years, particularly in the U.S. where valuations are low as a result of the current financial crisis. Futura has held off from buying companies because prices were obscenely high before the credit crunch hit. “We’ve been waiting for this for four or five years,” Doman says. “When things were escalating, we didn’t do a lot of expanding. We were just managing our businesses and trying to build cash.”
The hardest part, he says, will be to remain patient while seeking out the right buying opportunities. “I’m a very energetic kind of guy, and to sit back is very difficult,” he says. (That much is apparent upon meeting him. In an interview with Canadian Business, Doman can barely sit still, crossing and uncrossing his legs as he jumps from one topic to the next.)
Doman, who describes himself as a workaholic, puts nearly all of that energy toward his work. But he did get engaged in May and says he’s looking forward to starting a family. That may mean stepping back from Futura and relying more on his executive team, which isn’t necessarily a bad thing, he jokes: “I think they’ll be happy to see less of me.”