News

SCAN

COATED PAPERS

Fletcher Challenge Canada sells Blandin

Fletcher Challenge Canada Ltd. (FCC) announced in October that it has agreed to sell its Blandin Paper Co. subsidiary to UPM-Kymmene of Finland, Europe's largest producer of coated publication papers. The cash sale price of $650 million will result in an after-tax gain of $218 million for FCC, which will apply to its next financial quarter.

At the same time, the acquisition provides a solid base for UPM-Kymmene's expansion into North America. The U.S. is the world's largest market for coated groundwood papers, accounting for approximately 42% of world consumption.

The Blandin mill, in Grand Rapids, Minn., has production capacity of approximately 475,000 tpy of lightweight coated (LWC) groundwood papers used mainly by magazine and catalog printers located in the Midwest. Blandin has four paper machines, all of which feature off-machine coaters, supercalenders, and winders.

A new $28 million coater was installed on the No. 4 paper line during the first quarter of 1997, and an upgrade on the No. 6 paper line to replace the existing headbox and twin-wire former with gap-former technology is scheduled for early 1998. This will add 42,000 tpy of capacity to produce ultra-lightweight papers. The sale also includes 190,00 acres of Blandin's Minnesota timberlands.

In late October, pponline.com carried the story that the sale had been completed.

PRINTING/WRITING PAPERS

Sale of Repap coated paper unit approved

On Sept. 25, shareholders of Repap Enterprises Inc. approved the sale of Repap USA Inc. to Consolidated Paper Inc. for $674 million. Consolidated had agreed to pay $227 million in cash and assume $433 million in net debt and $14 million in retirement benefits. The net proceeds of $227 million will be used primarily to reduce liabilities, including all secured debt, Repap Enterprises said.

Repap USA includes a 500,000 tpy coated paper mill in Kimberly, Wis., and Repap Sales Corp. Remaining part of Montreal-based Repap Enterprises is Repap New Brunswick, which includes a coated paper and pulp mill, and the newly named Repap Marketing Inc. sales organization. The Repap Wisconsin mill has been renamed Inter Lake Papers.

NEWSPRINT

Tembec makes offer for Pine Falls mill

Tembec Inc. has offered C$100 million in cash and shares for the 171,000 mpty Pine Falls Paper Co. newsprint mill in Pine Falls, Man. Under the proposed offer, Tembec would pay about C$35 million in cash and issue about C$65 million in Tembec Class A shares, according to a Pine Falls news release.

"This proposal is in the best interests of the community of Pine Falls and all of the employees as it ensures the long-term viability of the mill and continuing employment," Pine Falls president Fern Pitre said in the release. "With an industry trend toward consolidation, a stand-alone facility has become vulnerable."

In a prepared statement, Tembec president and CEO Frank Dottori said the acquisition would be good for Pine Falls and Tembec, and "improve the earnings potential of Tembec." Earlier this year, Montreal-based Tembec entered the North American newsprint market when it paid C$182 million to become full owner of Spruce Falls Acquisition Corp., the operator of the 311,000 mtpy Spruce Falls newsprint mill in Kapuskasing, Ont.

Noranda Forest to
sell Maclaren mill

Noranda Forest Inc. recently put up for sale its 213,000 mtpy newsprint mill which is run by its subsidiary, James Maclaren Industries Inc. in Masson-Angers, Que. Noranda CEO Linn Macdonald said the decision to sell the newsprint mill was based on two principal factors: The Masson-Algers plant is Noranda's only newsprint mill in a company focused on producing free-sheet paper, panelboard products, lumber, and market pulp; and several consolidations in the North American newsprint industry leave the mill lacking the "size needed to compete effectively" on the newsprint market. Based on 1997 U.S. and Canadian newsprint mill capacity estimates, Maclaren has a 1.3% market share in North America.

A forest and paper analyst in Montreal said the mill will sell quickly, before year-end, for anywhere from an estimated C$170 million to C$255 million. The analyst identified three frontrunners for the mill: Avenor Inc., Donohue Inc., and Alliance Forest Products Inc. Also mentioned were Abitibi-Consolidated Inc. and Tembec Inc. Another analyst in Montreal viewed the mill as a good buy because of the firming North American newsprint market. A key issue to work out on the sale will be electricity rates for the mill. An important production cost-saver, all the power to the mill comes from a 225 MW hydroelectric facility owned by Maclaren-Quebec Power Co. The buyer will negotiate a price for power to the mill that could affect the purchase price, the analysts said. n

Kafus plans second kenaf newsprint mill

Kafus Capital Corp., developer of the Kenaf Paper Manufacturing greenfield newsprint mill project in Raymondsville, Texas, announced in September that it intends to build a kenaf-based newsprint mill in southern California. Kafus president Ken Swaisland broke the news of the $125 million proposed project at the groundbreaking ceremony for the company's CanFibre medium density fiberboard (MDF) plant in Riverside, Calif.

Upon completion of a feasibility study regarding site location, fiber supply, and permitting, Kafus expects funding and construction to begin by mid-1998. With an annual capacity of approximately 80,000 metric tons, the proposed mill would be identical to the still-unfunded Texas mill under development.

Kenaf has been grown in the Imperial Valley region of California since the late 1970s in a series of projects sponsored by the U.S. Department of Agriculture and Kenaf Industries, which is responsible for the kenaf supply for the proposed Texas mill.

Read the company's press release from Sept. 10 for more details, "Kafus to build kenaf newsprint mill in southern California."

Bowater upgrading Calhoun machine

Bowater Inc. will invest approximately $180 million at its Calhoun, Tenn., newsprint mill over the next two years. The company will replace its groundwood pulp mill with a TMP production line. Only a marginal increase in newsprint capacity may be added as a result of this investment.

The company will also convert one of its three recovery boilers into bubbling fluidized bed (BFB) boilers. After the boiler conversion, two older power boilers will be shut down. The two projects are being implemented to reduce operating costs at the mill while having a positive environmental impact.
CORPORATE STRATEGY

Weston to spin off E.B. Eddy in IPO

Canadian food giant George Weston Ltd. announced in September that its board of directors had approved the spin-off of its E.B. Eddy Forest Products Ltd. unit through an initial public offering (IPO) to take place in early November. Weston has been under some pressure to divest E.B. Eddy because falling pulp and paper prices have dragged down overall earnings and hurt the company's ability to attract investors. Weston's largest operating unit is Loblaw Co., Canada's biggest grocery chain. Its Weston Foods Ltd. unit has major food processing operations and branded products sold throughout Canada. As a result of the spinoff, Weston would be able to improve its shareholder value and concentrate on its food processing and distribution businesses, a spokesman said.

Under the terms of the proposed spinoff, Weston will sell 50 million shares of E.B. Eddy payable in two installments. Eddy, based in Ottowa, Ont., specializes in coated free-sheet, packaging and specialty papers, pulp, and lumber products.

G-P to split up timber unit with new stock

Georgia-Pacific Corp. (G-P) announced plans in September to create a new class of common stock for its timberlands, which will start trading on the New York Stock Exchange at the beginning of 1998 if the plan is approved by shareholders. The move will allow shareholders to benefit from the company's valuable timberland assets by reflecting the performance of that business through a separate operating company, said chairman and CEO A.D. "Pete" Correll.

Correll said that the board and management of G-P consulted with its financial advisers and reviewed trading values of other companies engaged in the timber and paper manufacturing sector and believe that the separation of the more stable and predictable cash flow of the timber business from those of the more cyclical paper and building products segments of the company should result in greater market recognition of the underlying value of each business. "This proposal is a means of creating value for our shareholders, while retaining ownership of our timberlands," commented Correll.

Under the plan, current shareholders would receive a stock dividend of one share in the new timber company for each G-P share. The two classes of common stock, known as letter stocks, would enable each company to retain its cash flow for reinvestment or to return cash directly to shareholders through dividends. PAPERBOARD

Caraustar to buy Baxter Tube Co.

Caraustar Industries Inc. said in September that it will buy the assets and business of Baxter Tube Co., a subsidiary of Cleveland, Ohio-based The Tranzonic Cos. Terms were not disclosed.

Caraustar is one of the U.S.'s largest manufacturers of recycled paperboard, making a variety of tubes and cores, composite containers, folding cartons, plastics, adhesives, and other industrial and consumer packaging. In a news release, Jim Russell, vice president of Caraustar's tube, core, and can division, said the Baxter Tube acquisition would provide expansion into the Midwest and establish a presence in Europe.

Baxter had sales of $12.3 million in fiscal 1997. It makes spiral-wound tubes at four facilities in Ware Shoals, S.C.; Perrysburg and Minerva, Ohio; and Leyland, Lancaster, U.K. Tranzonic said it expected the sale to close in October.

Somerville Packaging Div. of Paperboard Industries International Inc. said it was awarded a five-year, C$250 million contract to supply cereal boxes for Kellogg Co. About half of the Kellogg contract represents new business and part, approximately 25,000 mtpy, will be exported to the U.S., the company said.

Somerville, which has five folding carton plants in Montreal and Ontario, has supplied Kellogg's Canadian operations for about eight years. The new contract represents a major breakthrough to the U.S. market with an existing customer, said Laurent Lemaire, president and CEO of Paperboard Industries. Somerville will use boxboard from Paperboard's three Canadian mills, which are expanding their combined annual capacity this year by 40,000 metric tons to 365,000 mtpy. n

CONTAINERBOARD

International Paper closes two box plants

As part of its ongoing plan to improve profitability, International Paper Co. (IP) in October said it will consolidate box plant operations in California by closing two of its four container facilities. The box plants in San Jose and Stockton were expected to shut down Oct. 15 in an effort to address "overcapacity of boxes in that market," an IP spokesperson said. She said IP's container plants in two other California cities-Modesto and Carson-will continue to serve regional customers.

The move is part of IP's continuing plan, announced in July, to improve financial performance through plant shutdowns and the sale of $1 billion in assets. Paper analyst Matt Berler of Morgan Stanley called the container plant shuts "healthy" and said, "to the extent that there are fewer box plants beating up on one another to win business from the same customers, pricing ought to become less cutthroat."

Taken together, the box plants to be mothballed employ 112 workers, all of whom will be paid regular wages for a 60-day period, while non-union workers also will receive a severance package. IP said it will meet with union officials and members to negotiate the effect of the closures. BOXBOARD

Rock-Tenn, Sonoco merge partition units

Rock-Tenn Co. and Sonoco Products Co. have completed the formation of a joint venture that combines both companies' fiber partition business into a separate company called RTS Packaging. Solid fiber partitions are a leading form of interior protective packaging used to separate and protect glass containers and bottles and other products during shipping. When the proposal was announced in January, the companies cited consolidation in the glass container and beverage industry-which is the largest market for fiber partitions-as one major reason for the joint venture.

"The key reasons for choosing this business strategy are the operating synergies and cost efficiencies which will be achieved through the joint venture. Additionally, the joint venture will provide our collective customers with a highly focused supplier," said Jay Shuster, president and COO of Rock-Tenn, and Harris E. DeLoach, Jr., executive vice president of Sonoco, in a joint statement.

• Union Camp Corp. announced it will acquire Phoenix Display and Packaging Corp., a leading marketing, merchandising and point-of-purchase display company based in West Deptford, N.J. The agreement is subject to regulatory approval.

LABOR

Skeena bailout approved by workers

In the wake of another rift that again threatened the September deal to save Skeena Cellulose Inc., union workers approved a last-minute revision to the original pact proposed by the banks and the government.

Approval of the Skeena bailout deal was touch-and-go in a tension-filled week-all the way up to the final Oct. 3 bankruptcy deadline that could have left workers without any jobs at all. Union members voted 62% in favor to accept the final deal-reflecting less approval than the 83% vote in September; officials of the Pulp, Paper and Woodworkers of Canada union (PPWC) had in fact recommended rejecting the revised restructuring plan to show disapproval of company tactics and last-minute pressure.

The reworked deal resembles the bailout plan supposedly agreed to Sept. 10-14, but it contains minor changes that triggered both distrust and union disputes, threatening to vaporize the entire effort. Under the final rescue plan, the union still owns a 20% stake in the 1,200 mtpd pulp mill in Prince Rupert, B.C., in exchange for slashed wages and lost jobs; the Royal Bank of Canada and the Toronto Dominion Bank together own a 55% stake in the company in exchange for a C$95 million capital improvement loan coupled with a C$305 million write-down of a C$480 million debt; and the British Columbia government gets a 25% share in exchange for a C$74 million loan at commercial rates.
SPECIALTY PAPERS

Domtar finalizes sale of Beauharnois mill

Canadian forest products company Domtar Inc. has finalized the sale of its Beauharnois, Que., specialty paper mill to Spexel Inc., a recently formed company owned by mill management, employees, and private investors. No purchase price was disclosed.

Domtar had announced the sale to Spexel late last year as part of its strategy to focus on its integrated uncoated free-sheet business. The Beauharnois mill is non-integrated with two small paper machines with a capacity of 18,000 tpy. It focuses on production of specialty uncoated free-sheet grades such as security papers.
PULP

Jonquière, Que., kraft pulp mill to reopen

Cascades Inc. subsidiaries Paperboard Industries International Inc. and Rolland Inc. announced in September that they plan to restart the idled pulp mill in Jonquière, Que., in the fall of 1998. Out of C$55 million for the project, the company will spend C$40 million on capital improvements, including C$25 million in emission and effluent upgrades to meet environmental regulations and C$15 million for automation and modernization.

The mill will produce elemental chlorine-free (ECF) northern bleached softwood kraft (NBSK) in both air-dried and wet-lap form. Capacity of 70,000 mtpy will be virtually the same as before the mill was idled. The output will be mostly integrated, with about 40,000 mtpy for boxboard and 22,000 mtpy to 23,000 mtpy or more for fine paper at Rolland's mills in St-Jerome, Que., and its newly acquired Provincial Papers Inc. in Thunder Bay, Ont.; any excess is also expected to be used internally. n

Westvaco may make sterol from CTO

The North American pulp and paper industry is getting a taste of Finnish food enterprise, with the announcement that Westvaco Corp. has signed a letter of intent with Raisio Group in Finland for a possible joint venture to produce sterol from crude tall oil. If the shared technology/manufacturing skills agreement goes through, as expected, "in a matter of months," the chemical plant would be built adjacent to Westvaco's Chemical Div. facilities in North Charleston, S.C., and be operational by the year 2000.

The cost and capacity have yet to be determined. Westvaco spokesperson William P. Fuller III said the company's internal facilities in North Charleston, Wickliffe, Ky.; Luke, Md.; and Covington, Va., are expected to provide a sufficient supply of tall oil, but that it could also be purchased as needed.
CONSUMER PRODUCTS

K-C acquires another nonwovens product

Kimberly-Clark Corp. (K-C) is adding to its nonwovens product business with the planned acquisition of Tecnol Medical Products Inc., announced Sept. 7. North America's largest tissue maker said it will buy Fort Worth, Texas-based Tecnol for $400 million. The deal is expected to close later this year.

With the acquisition, K-C will have the leading share of the converted medical fabrics market with an estimated $500 million in annual sales. Currently, the company's healthcare business has sales of about $350 million.

Tecnol makes nonwoven disposable medical products that include surgical gowns, drapes, face masks, and sterilization wrap. The company had 1996 sales of $144.4 million.
INTERNATIONAL

UPM-Kymmene, APRIL create alliance

UPM-Kymmene of Finland and Singapore-based Asia Pacific Resources International Holdings (APRIL) have decided to create a strategic alliance involving swaps of 30% of their respective fine paper operations in a non-cash transaction. The European company will be called UPM-Kymmene Fine Paper and the Asian company will be called APRIL Fine Paper. Implementation is expected by year-end.

The European company will comprise UPM-Kymmene's fine paper units, Nordland Papier in Germany and Kymi in Finland, and will be the largest fine paper producer in Europe, with a combined annual capacity of 1.7 million metric tons of paper and 460,000 metric tons of related pulp, according to the announcement.

The new Asian company will be comprised of APRIL's paper mills now under construction in Sumatra, Indonesia, and Changshu, near Shanghai, China. A stationery plant near Shanghai is also to be included.

The companies said the agreement will enable UPM-Kymmene to gain "immediate access to the rapidly expanding Asian fine paper market" and APRIL to gain access to the European company's "world-leading position in research, production know-how, and marketing expertise, thereby ensuring the successful startup and future performance of its Asian fine paper operations." n

Mondi, Frantschach control Polish paper

The South African pulp and paper company, Mondi Ltd., and its Austrian associate, Frantschach AG South, have purchased a 65% controlling interest in Poland's largest pulp and paper company, Celuloza Swiecie. It was the last major paper company to be sold under Poland's massive privatization program, which began in 1992. Swiecie became the first paper company to be listed on the Warsaw stock exchange earlier this year, when 15% of its shares were sold in a public offering. An additional 15% was allocated to workers and the state retains a 5% holding.

Mondi's European affiliate, Mondi Minorco Paper (MMP), Frantschach and two minority interests, Bank Handlowy and the Polish forest company, Lasy Pantswowe, formed the FraMondi consortium to acquire the shares for approximately $157.6 million. FraMondi will have mangement and shareholder control of Celuloza and plans to invest $175 million in capital improvements. n

IP's Aussedat Rey sells Lancey mill

International Paper Co. said that its Aussedat Rey subsidiary in France has sold its Papeteries De Lancey mill to a management group, Lancey Investissements. Financial terms of the transaction were not disclosed. Lancey is based in Brignoud, France, near Grenoble, and produces approximately 100,000 mtpy of coated groundwood paper for the European magazine industry. IP acquired the mill with the 1989 acquisition of Aussedat Rey for $500 million. The company has three other mills that produce coated and uncoated free-sheet and specialty papers. Lancey Investissements is headed by Jean-Luc Dominici, who has been the CEO of Papeteries de Lancey since 1995.

Asia Pulp & Paper Co. said it lost one of two stationery converting units at its PT Pabrik Kertas Tjiwi Kimia Tbk converting facility in Mojokerto, East Java, Indonesia, as a result of a fire Sept. 26. The company said in a statement that "major disruptions" will occur in the production of writing pads, spiral notebooks, loose-leaf refills, stock forms, envelopes, and hardbook products; production of exercise books will not be affected since they are produced on the other converting unit. The two units have a capacity of 85,000 mtpy, but the company said it can shift about one-third of the expected fourth-quarter loss of 20,000 metric tons at Tjiwi Kimia to sub-contracted stationery production facilities in China and Singapore.

China-Malaysia pulp, paper mill announced

A pulp and paper mill on the island of Borneo would be built as a joint venture between Malaysia and Chinese government and business interests, international news wires recently reported. The joint venture agreement was signed by the Lion Group of Malaysia and the China Pulp and Paper Industry Co. and has the backing of government officials in both countries. It would represent the largest foreign investment by the People's Republic of China outside that country.

The $1.6 billion project would produce 750,000 mtpy of pulp and 225,000 mtpy of paper. A substantial portion would be exported to China. In addition, the project would have about 220,000 ha of forest plantation with an annual production of 3.8 million m3 of pulpwood. The forest plantation portion of the project would be 60% owned by Malaysian equity and 40% Chinese owned; the mill would have a 60% Chinese and 40% Malaysian equity split.
WOOD PRODUCTS

Crown Pacific to build wood plants

Crown Pacific Partners L.P. in August announced plans to build a new sawmill in Port Angeles, Wash., the second of two mill construction projects the company has announced for the U.S. Pacific Northwest. The high-technology stud mill, at a cost of $18 million, is slated for startup in third-quarter 1998. The company said the new mill, with capacity for about 95 million bd ft (mmbf), will allow it to add value to logs harvested from its nearby Olympic Tree Farm, which it acquired last year from Cavenham Forest via Willamette Industries Inc.

The company earlier announced plans to construct a new $17 million, 91 mmbf, state-of-the-art sawmill at its existing mill site at Bonners Ferry, Idaho. Management believes the company will realize sizable efficiency and fiber recovery improvements from the new facility. Crown said it has a total of 4.7 billion bd ft of timber holdings on 738,000 acres of land in the Northwest and six lumber plants with total capacity of 405 mmbf/year.

Weyco to close plywood mill

Weyerhaeuser Co. announced in early September it will permanently close its 154 million ft2 (mmsf, 3/8-in. basis) plywood plant in Philadelphia, Miss., in November, and boost log supplies for the sawmill it operates on the same site.

According to plywood vice president Mike Branson, "Philadelphia is our oldest and smallest plywood operation, and is located in a very competitive woodbasket." At the same time, he explained, "The overall supply of structural wood panels such as oriented strand board (OSB) continues to expand, increasingly displacing traditional plywood."

The company added that the mill's log cost has risen significantly in recent years and local sources say plylogs are becoming "scarce." In June, part of a similar reorganization of its wood products operations and raw material sources, Weyerhaeuser closed its plywood mill in Plymouth, N.C., with estimated capacity of 150 mmsf.
UNCOATED GROUNDWOOD

Stora's machine aims for market position

The 385,000 tpy supercalendered (SC) machine being installed at the Stora Port Hawkesbury Ltd. mill in Nova Scotia is on schedule and within budget, said executives for Stora North America Corp. Plans call for starting up paper machine No. 2 by mid-April next year, with expectations to produce 170,000 tons of SC-A/SC-A+ paper in the first year. Along with the machine, the $550 million project includes the installation of a 253,000 tpy thermomechanical pulp line, which also should start up in April.

"Our goal is to widen the SC market in North America," an executive for Stora North America said, referring to how the machine's output will fit into a North American SC market that had soft demand in 1996 (but has picked up with SC-A shipments, up 11% through the first half of this year compared with first-half 1996), hasn't had a price increase for 22 months, and seems to lack a price leader.

The new machine would bolt Stora to the top of the SC producer ranks in North America, ahead of 310,000 tpy SC producer Abitibi-Consolidated Inc., and 240,000 tpy SC-A producer Lake Superior Paper Industries, part of Consolidated Papers Inc.
TISSUE

Marcal Paper to add new tissue machine

Marcal Paper Mills Inc. in September announced a $65 million project to install a new tissue paper machine at its mill in Elmwood Park, N.J. The new machine, to be supplied by Valmet Karlstad AB, will add approximately 65,000 tpy of capacity to the plant. Projected startup is scheduled for first quarter 1999. The Elmwood Park mill currently has a capacity of 100,000 tpy of 100% recycled tissue products on three paper machines.

This expansion of Marcal's tissue manufacturing capacity will support current and expected growth of the company's consumer brand business, private label, and away-from-home businesses. The paper machine project follows significant modernization and expansion of the company's converting and packaging operations at Elmwood Park.

This modernization has resulted in the addition of equipment to produce bath tissue, kitchen roll towels, napkins, and facial tissue products.
INTERNATIONAL

Sappi to buy 91.5% of KNP Leykam

Sappi Ltd. of South Africa has agreed to acquire 91.5% of KNP Leykam, Europe's leading producer of coated free-sheet and lightweight coated publication papers. The announcement ends a year-long effort by the KNP BT packaging and paper distribution group to sell its papermaking division. Sappi, South Africa's biggest paper producer, will pay a purchase price of NLG1.5 billion (US$756 million) and assume debt of approximately NLG1.1 billion (US$545 million) for the Austrian paper company.

The final purchase price will be settled by the issue of Sappi shares and zero coupon notes to Dutch parent KNP BT, which will then hold approximately 15% of Sappi's common shares. The transaction is expected to close by the end of the year. The expanded Sappi group will be the world's largest producer of coated free-sheet paper.