Cascades to Purchase Domtar's 50% Interest in Norampac Inc.

Kingsey Falls, Quebec, Canada, 05 December 2006 — Cascades Inc. (TSX:CAS) announced that it has reached an agreement in principle with Domtar Inc. to purchase Domtar's 50% interest in Norampac Inc., for a cash consideration of CAD 560 million.

In commenting on this transaction, Alain Lemaire, president and CEO, stated "The acquisition of Domtar's 50% interest in Norampac Inc. represents an important step towards our stated strategic goal of concentrating our activities in packaging and tissue, two of the strongest sectors in the industry today. An issuance of common shares will allow us to finance the acquisition of Norampac without placing unnecessary stress on our balance sheet. It also provides added liquidity to our stock which should benefit all of our shareholders. This transaction will not affect the day-to-day management of Norampac."

Marc-André Dépin, president and CEO of Norampac, said: "While this transaction marks the end of a joint venture that has been very beneficial both for Norampac and its shareholders, it also constitutes an important step in the long-term development of Norampac. Cascades is fully committed to developing its packaging group to its fullest potential and Norampac will benefit from this strategy going forward."

Financing

Cascades also announced that it has obtained commitments for the financing necessary to complete the transaction. This financing will replace the existing credit facility and provide for a new CAD 1.05 billion credit facility consisting of a CAD 750 million five-year revolving facility, a CAD 100 million six-year term facility, and an unsecured bridge facility of CAD 200 million.

Cascades also launched a CAD 150 million subscription receipt offering through a syndicate of underwriters co-led by CIBC World Markets Inc., National Bank Financial Inc., and Scotia Capital Inc. Each subscription receipt gives the right to its holder to receive one common share upon the closing of the transaction. The aggregate gross proceeds of the public offering and of a concurrent CAD 50 million private placement done at the public issue price will also be used to finance the acquisition. The underwriters have an option to purchase up to CAD 50 million of subscription receipts until any time before closing.

The subscription receipts will be issued to the public pursuant to a short form prospectus to be filed with securities regulatory authorities in each province of Canada. Closing of the subscription receipt offering is expected to take place on or about 20 December 2006. The common shares have not been and will not be registered in the United States under the Securities Act of 1933 and may not be offered or sold in the United States except in accordance with an exemption from registration.

Closing of the bank financing and of the transaction is expected to occur before year end.

Founded in 1964, Cascades produces, transforms, and markets packaging products, tissue paper, and fine papers composed mainly of recycled fibers. Cascades employs nearly 14,300 men and women who work in some 120 modern and flexible production units located in North America and Europe. The company's shares trade on the Toronto Stock Exchange under the ticker symbol CAS.