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MILLINOCKET – It already operates mills in Millinocket and East Millinocket on behalf of the mills’ owner, but Fraser Papers hopes to buy the plants during the first quarter of 2007, its president said Tuesday.
Fraser has formed a special committee of independent directors of Fraser Papers to review a potential transaction with the mill’s owner, Brookfield Asset Management, and recommend it to the minority (non-Brookfield) shareholders of Fraser, Fraser President Peter Gordon said.
“We’re still in discussions with Brookfield in that regard,” Gordon said Tuesday.
Brookfield officials did not immediately return messages left Tuesday.
Fraser has operated the mills since 2003, when the facilities were acquired out of bankruptcy by Toronto-based Brascan Corp., which now is known as Brookfield Asset Management. Katahdin Paper Co. LLC, the name under which the mills operate, was formed by Brascan to be the direct ownership entity for the mills.
Buying the mills would position Fraser well, Gordon said.
“It’s an opportunity for Fraser to grow its paper business in a substantial and meaningful way, particularly in the ground wood and paper market,” Gordon said.
Brookfield Asset Management will hold its year-end meeting Feb. 9, where senior management team members will discuss 2006 results and current business initiatives.
About 550 people work at the mills in Millinocket and East Millinocket, which each year produce about 250,000 tons of paper used in phone books and reference materials and 190,000 tons of paper used in magazines, catalogs and direct mailing inserts, he said.
The East Millinocket factory makes the phone book and reference papers, and the Millinocket mill magazines, catalogs and direct mailing inserts.
Of the two, East Millinocket’s mill is healthier, producing a leading share in the directory market, Gordon said. Millinocket’s mill is less profitable because of operational problems and worldwide competition and is not running at full capacity. Both mills have been reduced from about a dozen paper machines to three as company officials have torn out old or unused equipment.
“We have made great strides in improving the performances of both mills,” he said.
The East Millinocket mill is expanding its ground-wood pulp operations to compensate for the closing of a pulp mill last summer in Port Cartier, Quebec. Uniforet Inc. closed its bleached chemi-thermo-mechanical market pulp mill in July, eliminating as many as 80 jobs. Katahdin Paper was leasing that mill to make pulp for its Millinocket plant.
East Millinocket’s plant has a grinding room capable of producing 350 to 400 tons a day of ground-wood pulp, which can be piped to Millinocket. The Quebec closing will likely lead to more workers being hired in East Millinocket, but no more than 10, Gordon said.
“The opportunity is not to increase employment. The opportunity is to create more pulp at lower cost using the existing capacity,” he said. “It’s a very challenging environment in which to operate and to grow, but we are very confident in our prospects in Katahdin.”
Fraser already owns mills in Madawaska, where it has 780 employees, and in Edmundston, New Brunswick, where about 400 people are employed. It owns a sawmill in Ashland, a pulp and paper mill in Gorham, N.H., and a pulp mill in Thurso, Quebec. Fraser shut down a mill in Berlin, N.H., earlier this year, eliminating 250 jobs at the facility.
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