Stora Enso prepares for '08 acquisition

Duluth's Stora Enso paper and recycling mills are expected to turn over a new page in their history early next year when they are expected to be acquired by a 2-year-old paper company called, appropriately enough, NewPage Corp.

Duluth's Stora Enso paper and recycling mills are expected to turn over a new page in their history early next year when they are expected to be acquired by a 2-year-old paper company called, appropriately enough, NewPage Corp.

As NewPage prepares for the acquisition, company officials are mum about what the future might look like. "What's really important is that we keep on track until the first quarter of 2008," company spokeswoman Amber Garwood said.

It's an enormous acquisition for the Miamisburg, Ohio-based company. NewPage and Stora Enso North America are similar-sized companies, and integrating the two cultures could be challenging.

However, the purchase is expected to giveNewPage about 36 percent of the North American coated-paper market, making it a major player in the industry.

The acquisition is expected to be complete during the first quarter of 2008. The deal, in which NewPage will pay about $2.5 billion cash and other considerations for the eight paper mills in Wisconsin and Duluth, is expected to double the company's annual revenue, production capacity and work force.


NewPage owns four paper mills that manufacture coated paper, as do most of Stora Enso's mills. NewPage is privately held by investment firm Cerberus Capital Management LLC of New York City.

At least one analyst thinks the acquisition of Stora Enso is a good deal. Claudia Shank of JPMorgan in New York City said shortly after the agreement was announced that the move should increase prices for coated paper, which have been low, which will be to the advantage of all coated-paper makers, including NewPage and Sappi Fine Paper, which has a mill in Cloquet.

Stora Enso's Duluth mills don't produce coated paper. The 20-year-old paper mill, formerly called Lake Superior Paper Industries, makes supercalendered paper used for newspaper inserts, catalogs and magazines. The recycling mill, which was built in 1993, takes waste office paper and turns it into recycled pulp.

The Duluth mills were owned throughout their histories by Consolidated Papers Inc., and Minnesota Power. Pentair Inc. was a partner in building and owning the paper mill.

Together the Duluth mills employ about 280 workers.

NewPage began life after MeadWestvaco Corp. sold its paper business to Cerberus Capital Management in January 2005.

Over the past two years, NewPage has sold its carbonless paper business to Glatfelter and shut down a paper machine at its Luke, Md., mill. Those moves and others have eliminated about 2,000 people from the payroll, Garwood said.

Members of the United Steelworkers, the union that represents workers at all four plants (as well as all Stora Enso North America mills except Duluth and Port Hawkesbury, Nova Scotia), said that management from MeadWestvaco has stayed largely intact at the mills.


However in April, NewPage had a high-level shakeup. Peter Vogel Jr., the first president and CEO, was replaced by board chairman Mark Suwyn, who added the title CEO. Rick Willett Jr., who came from Teleglobe International Holdings Ltd., became president and chief operating officer. In addition, one member of the board of directors resigned and three members were added to open positions.

In 2006, NewPage planned an initial public offering, but postponed it indefinitely "due to market conditions," a company announcement said.

Garwood said an IPO is a possibility, but not in the immediate future.

The company has realized net losses at the end of the two fiscal years it has been in existence -- $65 million in 2005 and $32 million in 2006. It also posted a net loss of $20 million in the first half of 2007.

In the announcement of its year-end 2006 results, Suwyn said, "We continued to see the negative effects of growing imports of coated freesheet paper from China, Indonesia and South Korea, which we believe is being sold in our markets at artificially low prices." The company last week won a victory at the U.S. Department of Commerce, which ruled that the United States will enforce antidumping laws and impose duties on those countries.

That sort of aggressive action to save jobs sits well with the Steelworkers. "We have a very good relationship with NewPage," said Gary Hubbard, spokesman for the union.

Sally Feistel, staff representative for Local 2-21 at NewPage's Escanaba, Mich., mill, said the company has open dialog with the union and has frequent labor-management meetings.

Stora Enso union members don't have to worry about job security because a recent contract ensured employment security for the work force, including successorship language guaranteeing the union contract will remain in effect if the business is sold, said Michael Bolton, subdistrict director of USW District 2.


That does not apply to Stora Enso employees in Duluth, who voted down union representation three years ago. "They have no guarantees," Bolton said.

But until the sale is complete, no one will know whether the company will be making any changes. "No announcements have been made and won't be made, regarding changes in the organization until after closing," Stora Enso spokesman Tim Laatsch said.

One thing is certain, however, Garwood said: The company aims to grow.

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