January 26, 2022

Champion buys 140,000 acres from Fort James

Champion International Corp. has acquired 140,000 acres of forest lands in central Maine from Fort James Corp. In addition to expanding its landholdings to more than 900,000 acres in the state, the Stamford, Conn.-based company also has purchased Fort James’ Diamond Lumber Mill in Passadumkeag.

The companies did not disclose the purchase price.

Officials from Champion are touting the acquisitions as part of a strategic plan unveiled just last month. The plan identified the company’s coated paper products as a “core business” and promised acquisitions of softwood timberlands to supply its coated paper mills.

Champion’s paper mill in Bucksport produces daily about 1,300 tons of coated paper, which is sold to the magazine and catalog industry. The mill employs 1,150 people but a voluntary retirement program has been introduced to bring those numbers down.

“We’re buying it primarily for the softwood. It’s the softwood that is strategic to our business,” said company spokesman Keith Cunningham of the forest land acquisition.

The forest lands are located in Penobscot, Piscataquis, Hancock, Washington and Somerset counties and in some places are contiguous to Champion’s existing land holdings.

Cunningham said the softwoods — spruce and fir trees — will be used both in the paper mill in Bucksport and the lumber mill in Costigan. The lumber mill in Passadumkeag that Champion has purchased from Fort James also uses softwoods.

Company officials said they plan to continue operating the Passadumkeag lumber mill, which employs 125 people and produces 86 million board feet of lumber annually.

With its paper mill and the addition of a second lumber mill, as well as its forest management operations, Champion will employ 1,500 people in Maine and represent the fourth largest landowner in the state. At the same time, Fort James continues its transformation from a traditional paper company, with large landholdings and related forest-product ventures, to what officials are describing as a streamlined consumer product-oriented company.

Fort James — its name is the result of the recent merger of James River Corp. of Virginia with Fort Howard Corp. of Wisconsin — has shed a number of its peripheral ventures and, over the last five years, has been selling off its timberlands. With the Maine sale, the company has no major holdings in Maine. Its last remaining major holding is 11,000 acres in the Northwest.

The company has been emphasizing its tissue products to the delight of Wall Street where, bucking the cyclical nature of the paper industry, it has posted some of the best financial results in the industry.

Over the first six months of this year, the two companies that merged to create Fort James boasted a combined net income of $209 million, up from $128 million for the same period in 1996. Their combination, which was announced in May, created the world’s second largest tissue company, with annual estimated revenues of $7 billion.

Fort James has a tissue and paper towel plant in Old Town on the Penobscot River. The mill employs 700 people.

Champion also has been finding favor with investors. Its net income was down significantly in 1996 and the company posted losses in the first two quarters of this year. But Champion’s financial picture began to improve in the third quarter as paper prices improved.

“The acquisition seems pretty strategic,” commented Kathryn McAuley, an equity analyst with New York’s Brown Brothers Harriman. “They have the mill in Bucksport. The lands are well situated. They’ve announced a new plan and coated paper is one of the things they’re focusing on.”

McAuley said that, with weak paper markets getting stronger and a restructuring plan well-received by Wall Street, Champion is better situated to try to meet its goal of annual profits of $400 million.

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