MERGERS/ACQUISITIONS

 

Weyerhaeuser buying MacMillan Bloedel

In a stock swap valued at $2.45 billion (C$3.6 billion), North America’s fourth-largest paper and forest products company, Weyerhaeuser Co., is buying Vancouver, B.C.-based MacMillan Bloedel Ltd. (MB), one of Canada’s oldest and most venerable industry players. Once the transaction is complete, Weyerhaeuser will become second to International Paper Co. (IP) with sales of $13.3 billion. The deal is expected to be completed by the fourth quarter following approval by MB shareholders and regulators.

MB operations include 1.1 million tpy of containerboard capacity at mills in Pine Hill, Ala., Henderson, Ky., and Sturgeon Falls, Ont., and 19 converting facilities with annual capacity of 8.2 billion ft². MB also operates three oriented strand board (OSB) plants, three plywood mills and six lumber mills and owns nearly 7 million acres of timberlands. MB sold its paper operations in 1998 with those operations now operated as Pacifica Papers Inc.

The deal should result in about $150 million in synergies, and although Weyerhaeuser said it was too early to talk about layoffs, there are no plans to close manufacturing facilities. Elimination of one of the corporate headquarters in Vancouver could result in some administrative cuts.

 

G-P seals Unisource deal for $1.24 billion

Georgia-Pacific Corp. has received ap-proval for its $1.24 billion bid, including the assumption of $400 million in debt, for giant paper distributor Unisource Worldwide Inc.

G-P expects to save $75 million annually over the next two years from the joining of the two companies, including eliminating duplicate warehousing, shipping, and administrative functions; and in sales and marketing expenses.

G-P plans to run Unisource from Atlanta as a separate subsidiary, retaining the name but closing the Berwyn, Pa., headquarters. The sales force will be reduced. In all the company expects 300 to 350 positions to be cut over time.

 

NEWSPRINT

 

Kruger proceeds with Corner Brook rebuild

Kruger Inc. is proceeding with its previously announced C$20 million rebuild of the No. 2 paper machine at the Corner Brook Pulp and Paper Ltd. newsprint mill in Corner Brook, Nfld. The machine was shut for 17 days starting June 28.

Following the rebuild, machine speed will increase to 2,900 fpm from 2,300 fpm. The machine’s capacity will increase by 22,000 mtpy to 110,000 mtpy. Total mill capacity will rise from about 385,000 mtpy to about 405,000 mtpy.

 

Abitibi to shut PM at W. Tacoma mill

As part of its plan to remove 350,000 mtons of newsprint capacity, Abitibi-Consolidated Inc. shut the No. 2 paper machine at its West Tacoma mill in Steilacoom, Wash., effective June 30. “The market just wasn’t there to support the machine’s ongoing viability,” said Alain Grandmont, vice president of newsprint operations.

The No. 2 paper machine has capacity to produce 45,000 mtpy of colored and bulky newsprint, essentially the same grades produced by the recently idled paper machine at Iroquois Falls, Ont.

Before the company decided to shut the machine, it considered several options including conversion to a different grade, according to Susan Rogers, vice president of corporate communications. She stated, “This machine is very small and would not be very competitive in just about any grade. The size limits its potential.”

The company said the closure will reduce the mill’s 252-person workforce by 50 positions. The reductions will come primarily from severances as well as some early retirements.

The shut does not change the facility’s status as a “non-cornerstone,” or high-cost, mill, according to Rogers. She said the company currently is evaluating several possible options for the one-machine mill, including investment and joint venture opportunities.

 

Garden State boosts pulp capacity

 

Garden State Paper Co. has completed an expansion of the deinked pulp (DIP) mill at its Garfield, N. J., newsprint mill. The mill installed two three-stage pulp washing lines from Andritz Inc. earlier this year to boost DIP capacity from old newspapers (ONP) by 20% to 960 tpd.

 

Abitibi goes to 100% recycled content

Abitibi-Consolidated Inc. has completed the expansion of its deinking operations for old newspapers (ONP) at its mill in Snowflake, Ariz. The expansion upped deinked pulp (DIP) capacity to 1,100 tpd and will allow Abitibi to increase the recycle content of the newsprint produced at the mill from 70% to 100%. The $25 million project was to be completed in late July and will eliminate the purchase of bleached kraft pulp.

 

Joint venture at Chandler mill stalled

Abitibi-Consolidated Inc. says that talks to create a joint venture to run the No. 1 paper machine at its newsprint mill in Chandler, Que., have reached “a stalemate.” As a result, the company on June 20 indefinitely idled the machine.

The announcement to permanently shut the mill’s No. 2 machine, with capacity to produce 110,000 mtpy of newsprint, came in January. At that time, the company announced it was in talks with Groupe Cèdrico to create a joint venture to run the 150,000 mtpy No. 1 machine.

A major hurdle was cleared earlier this year when the joint venture secured the fiber rights to the mill from the Quebec government. The second hurdle was to reduce the mill’s labor costs by 10%, but attempts to negotiate with the labor union representing workers at the mill have failed, according to Abitibi.

Abitibi says Groupe Cèdrico has suspended the due diligence process until an agreement with the union is reached. There has been no formal withdrawal of the joint venture proposal.

 

CORPORATE STRATEGY

 

IP shuts machine, cuts 350 jobs

International Paper Co. (IP) announced it will permanently shut an aged paper machine making label and coated one-side (C1S) paper at its Moss Point, Miss., mill and scale back production on a second paper machine making bleached paperboard. There will also be a partial shutdown of the pulp mill as paper production is reduced. The company planned to complete these actions on or before Aug. 8.

IP said the No. 3 paper machine is too costly to operate “in today’s highly competitive coated paper market.” In addition, there is excess production capacity within the IP mill system, said a company spokesman. The machine produces about 60,000 tpy of label stock.

Meanwhile, production on the newer and larger No. 5 paper machine will be “slowed indefinitely” due to low demand. The machine currently produces about 200,000 tpy of coated bleached paperboard. Daily production will be reduced to about 450 tpd.

Moss Point will eliminate 140 jobs permanently when it shuts the No. 3 paper machine and another 210 workers will be laid off indefinitely as production in the pulp mill and the No. 5 machine is cut back.

 

Crown, CEPunion disagree on ESOP

Crown Packaging Ltd. has failed to reach an agreement with an employee-sponsored restructuring plan to improve the company’s Canadian paper and packaging operations.

Last year, Crown permanently shut an unprofitable paper machine at the Burnaby mill. Prior to the paper machine shutdown, the mill employed 284 workers, including 225 members of the Communications, Energy, and Paperworkers (CEP) union. The layoffs following the closure cut the mill workforce to about 187 employees.

Local union members representing about 800 workers at Crown Packaging’s Burnaby mill and packaging operations began putting together an employee share ownership plan (ESOP) last year following the paper machine closure. Negotiations with Crown Packaging reached an “advanced stage,” said a CEP spokesman, but the parties could not reach a definitive agreement to present to employees.

Crown Packaging said discussions will continue with employees, bondholders and other parties with an eye on improving the overall financial health of the company.

 

TRANSPORTATION

 

Freight delays follow Conrail carve up

Following the June 1 carve up of Conrail Inc. by Norfolk Southern Corp. (NS) and CSX Corp., the companies are receiving mixed reviews from the pulp and paper industry on the smoothness of the transition. Some pulp and paper producers are reporting freight delays, while others say it hasn’t affected operations at all. But preliminary reports suggest that, by and large, the delays have not significantly interfered with pulp and paper production.

Norfolk Southern confirmed it has experienced computer system problems that have contributed to train backups, delays, routing problems, and difficulties in providing customers with timely information about their shipments. The railroad said terminals in Elkhart, Ind., Bellevue, Ohio, and Conway, Pa., are congested but trains are moving through. NS said it has made significant progress in fixing problems with the crew calling system that have caused delays in dispatching crews to trains and achieving efficient use of train crews. In addition, NS has operated special trains, changed routings, and shifted traffic to truck and air to meet critical customer needs.

CSX officials could not be reached for comment, but a Wall Street Journal article said the railroad “cited some computer problems and freight delays at facilities in Cleveland, Indianapolis, and Albany, N.Y.”

 

RECYCLED PAPERBOARD

 

Rock-Tenn closing N. J. paper mill

Rock-Tenn Co. announced it would close a small recycled paperboard mill located in Jersey City, N. J., at the end of June. The mill, formerly operated by The Davey Co., produces approximately 100 tpd of the company’s distinctive Red Label book and binder coverboard stock. The customer requirements of the Jersey City mill will be transferred to other manufacturing facilities, primarily the Vineland, N. J., converting plant and a second coverboard mill located in Aurora, Ill.

Rock-Tenn stated that its paperboard products division is the largest North American producer of coverboard for books and a leading manufacturer of coverboard for the binder industry.

 

CONTAINERBOARD

 

Re-Box Paper mill delayed until 2000

Plans to construct a unique greenfield paperboard mill in DePere, Wis., have been pushed back until August 2000. Re-Box Paper Mill LLC will include a single Voith Sulzer paper machine that will manufacture recycled-based linerboard, corrugating medium and paperboard. Production will be converted directly from the machine into packaging products. A laminating machine is scheduled to begin production at the mill in May 2000.

The company purchased the former Riverside Fiber in DePere in December 1998 to provide deinked pulp to both the Re-Box Paper mill and Oconto Falls Tissue LLC in nearby Oconto Falls, Wis.

 

Weyerhaeuser drops plans for Ark. mill

Weyerhaeuser Co. abandoned plans for building a containerboard mill along the Red River near Fulton, Ark. The company said it would not use local permits in Arkansas for constructing the mill. The company had considered building a greenfield mill to manufacture kraft linerboard. The planned two-machine mill would have had a capacity of 650,000 tpy.

 

Weyerhaeuser plans Ore. mill upgrades

 

Weyerhaeuser Co. will invest $18 million at its kraft linerboard mill in Springfield, Ore. No. 2 paper machine will be rebuilt for quality improvements including installation of a new drive system to increase machine speed by 13 percent. Completion is scheduled for April 2000.

 

>MARKET PULP

 

Ponderosa mill running full-time

Ponderosa Fibres of Washington’s market deinked pulp (MDIP) mill in Wallula, Wash., has returned to full production. The greenfield mill, originally set up with capacity of 95,000 tpy, started running continuously in late April.

The mill has operated on and off since early last year. The mill started up in early 1998, and was down for seven to 10 days a month during 1998. This year, before the full startup, and while undergoing modifications and further optimization, the mill was down for five to eight days per month, said Roland Fjallstrom, executive vice president and COO of Ponderosa.

The company has been involved in litigation with contractor Parsons Main. Fjallstrom expects the conflict with Parsons Main to go to arbitration.

In addition, Ponderosa Fibres of Washington filed for bankruptcy on Jan. 21, and is still in the process of restructuring its debt.

 

Millar Western will run Chetwynd mill

Louisiana-Pacific Corp. (L-P) and Millar Western Forest Products Ltd. have entered into an agreement that advances strategic aims for both companies regarding L-P’s 160,000 mtpy hardwood bleached chemithermomechanical pulp (BCTMP) in Chetwynd, B.C.

Millar Western will run the mill and market its output for up to two years, and it has a first option to buy the mill, which L-P has been wanting to sell. Millar Western’s purchase would depend on a number of factors, including an assessment of the facility’s potential. The plan involves cooperation with provincial agencies that would lower electricity and freight costs and L-P would also gain concessions from workers.

L-P will also invest about C$9.5 million in reliability and efficiency improvements at the BCTMP mill. Once Millar Western gets the mill running under its own management, representatives from both companies will decide what is needed.

The mill has been losing money and is not a part of L-P’s building products strategy. L-P said it had considered permanently shutting the operation.

RECYCLED PAPER

 

Gallaher Thorold closes paper mill

Gallaher Thorold Paper Co. shut down its 100,000 mtpy recycled paper mill in Thorold, Ont. in early June "The company’s in relatively deep financial trouble," John Paccanaro, vice president, told the Toronto Globe and Mail. “The investors and the bank have decided to shut it down until such time as a good going-ahead plan can be made. That’s expected to take approximately a week to two weeks.”

The Gallaher mill has not operated at nearly full capacity this year. The former Noranda Forest Inc. mill was reopened under new management and ownership in 1997 and quickly grew to employ 325 people operating three paper machines by mid-1998.

The mill produces a line of recycled papers for envelopes, forms, bond, tablet and cover stock, as well as wallcovering and latex saturated papers using old telephone directories as a fibers source.

 

PRINTING/WRITING PAPER

 

Mead restructures, shuts 4 PMs

Mead Corp. said it will shut four uncoated paper machines at its Rumford, Maine, mill by Dec. 31 as part of an ongoing effort to sharpen its focus on coated paper and improve financial performance at its Maine operations. The machines have a combined annual production capacity of 110,000 tons of uncoated free-sheet and uncoated commodity grades for use in specialty applications. The Rumford operations will focus solely on the manufacture of coated two-side and coated one-side products.

About 200 employees will be affected by the shuts. The company plans to convert one of the machines being shut to a pulp dryer. In addition, the mill’s No. 11 coated paper machine, which was idled in November 1998, will come back on line as business conditions improve.

 

SAFETY

 

Explosion idles G-P tissue, pulp mill

Georgia-Pacific Corp. reported that its Bellingham, Wash., tissue and market pulp mill was idled following an afternoon explosion on July 2 that did not seriously injure any of the more than 300 workers on duty at the time. The company said four workers were examined on site and released.

A spokesman said that a preliminary investigation indicated that a compressor in the mill’s steam plant overheated when a cool water valve was apparently not turned on. A high temperature interlock safety device did not engage to turn the compressor off which caused the compressor to explode. A thorough investigation is planned. A damage cost estimate was not available.

Around 300 to 350 workers on duty at the time were safely evacuated from the mill, and that no impact on the environment had occurred. Local officials said nearby buildings to the mill were damaged. Most of the pulp and paper operations were brought back up in one to two days.

The mill in downtown Bellingham, about 90 miles north of Seattle, has capacity for 88,000 tpy of tissue and 135,000 tpy of bleached sulfite market pulp. The mill employs a total of 860 workers.

 

INTERNATIONAL

 

Second uncoated free-sheet PM starts

Asia Pulp & Paper Co. Ltd. (APP) began production on PM No. 2 at its Gold East Paper mill in Jiangsu, Dagang, China, in May. This start-up follows the start of PM No. 1 in February. APP plans to meet the growing demand for 40 to 90 g/m² graphic papers in the Chinese marketplace with the new mill.

The identical PMs were supplied by Voith Sulzer Paper Technology. Each has a wire width of 10.5 m, reel width of 9.77 m, and design speed of 1,500 m/min. Voith rates each PM with a capacity of 460,000 mtpy while APP has listed them with a capacity of 400,000 mtpy.

 

Stora Enso adding to its pulp capacity

Stora Enso Oyj said it plans to build a new 500,000 mtpy bleached birch pulp line in Imatra in eastern Finland at a cost of $385 million, replacing a 1950s era-80,000 mtpy line that no longer meets air pollution standards. The new line will start up in spring 2001.

The replacement line will increase total pulp capacity at the facility to about 1 million mtpy and will make the mill fiber self-sufficient. Other existing lines in Imatra have a capacity of 240,000 mtpy of softwood pulp, and 170,000 mtpy of unbleached pulp. The mill also manufactures about 1 million mtpy of paper and board.

Stora Enso said in a statement that the investment includes construction of a pulp dryer, alteration works at the power plant, and a partial upgrading and expansion of the wood handling department.

 

TISSUE

 

G-P, Chesapeake form tissue partnership

Georgia-Pacific Corp. (G-P) and Chesa-peake Corp. have agreed to combine their away-from-home tissue businesses in a new joint venture company. G-P will pay $730 million to Chesapeake for its wholly-owned Wisconsin Tissue Mills Inc. subsidiary and would own 90% of the proposed joint venture with Chesapeake holding the remaining 10%.

Wisconsin Tissue operates mills in Alsip, Ill., Menasha, Wis., and Flagstaff, Ariz., that have a total capacity of 320,000 tpy of tissue and toweling for the away-from-home market. The company also owns Wisconsin Tissue de Mexico SA, a converting and distribution operation in Mexico.

G-P produces approximately 200,000 tpy of commercial tissue at its mills in Gary, Ind., Palatka, Fla., and Crossett, Ark., and tissue converting operations in Brattleboro, Vt., and LaGrange, Ga., including some purchased tissue. The company manufactures consumer tissue products at its mills in Bellingham, Wash., Plattsburgh, N. Y., Palatka, Fla., and Crossett, Ark., which will not be included in the new partnership.

Plans by Wisconsin Tissue to build a 100,000 tpy greenfield tissue mill in Weldon, N. C. were put on hold as a result of the announcement. A final decision to build the greenfield mill is expected to be made in the fourth quarter after formation of the joint venture is completed, which is expected in October following completion of due diligence and regulatory approval. The installation of a new tissue machine at G-P’s Port Hudson mill in Zachary, La., which was first announced in May, is still on schedule to start production in late 2000.

Wisconsin Tissue had recently changed its bleaching plans for the proposed 100% recycled fiber-based mill. The bleaching sequence was changed from one using sodium hypochlorite to a two-stage non-chlorine process using sodium hydrosulfite followed by hydrogen peroxide. The company had been under pressure from environmental groups to use a non-chlorine bleaching process.

 

INDUSTRY EVENT

 

Planet Pulp&Paper program team expands

Dr. James A. McNutt, president and CEO of Jaakko Pöyry Consulting-North America (JPC) and a widely-recognized business leader and strategist in the forest products industry, has joined the program advisory team for Planet Pulp &Paper, a unique international paper industry event to be held at McCormick Place in Chicago, March 22-24, 2000.

McNutt is responsible for leading the Paper Business 2000 track for Planet Pulp & Paper. This track focuses on the challenging business and market issues facing the global paper and converting industry, an area where McNutt’s experience and vision will provide for dynamic interaction between speakers and attendees.

Combined with the keynote kickoff session, the Paper Business 2000 track will challenge senior level managers—from the mill to the corporate office—to explore new ideas for making the paper industry a successful global leader in business and technology implementation. The sessions, which will utilize success stories and hard lessons from both inside and outside the forest products industry, will provide a dynamic forum for senior level managers to interact and discuss such crucial topics as successful enterprise management, effective use of capital resources, the challenges of labor and human resources, managing global forest products companies while adapting to evolving market developments, and embarking on change management for industry revitalization.

Other tracks in the Planet Pulp & Paper program will explore such major industry issues as value-added production, process automation and sensors, information technology and supply chain management, fiberline technologies, environmental challenges, mill maintenance, and the state of industry research and development. Each major track will be led by a leading industry authority. Some of the other session leaders and their program tracks include Jim McGrane, v.p. business process development, Mead Corp.—Information Technology; Chuck Klass, president of Klass & Associates—Value-Added Production; and, Lars Ingman, president of Conmark Systems, Inc.—Process Automation.
For more information on exhibiting or attending Planet Pulp&Paper, visit our website at www.planetpulp.com or contact Jane McDermott at (212) 615-2200 or fax: (212) 643-5604.