Fraser papers to buy Katahdin mills

EAST MILLINOCKET – Toronto-based Fraser Papers Co. announced Tuesday evening it plans to buy the former Great Northern Paper mills in Millinocket and East Millinocket.

Fraser Papers, which already operates the mills on behalf of Katahdin Paper Co. LLC, has been in discussions for months to buy the mills outright. Together, the Millinocket and East Millinocket paper mills employ about 600 people.

The deal between Fraser and Brookfield Asset Management, which bought the mills out of bankruptcy in 2003 when it was known as Brascan Corp., is expected to close in the second quarter subject to approvals, Fraser said in a statement.

Under the agreement, Fraser will pay $50 million plus working capital of about $30 million, as well as royalty payments based on the performance of the supercalendered paper product line from the Millinocket mill, officials said.

The deal will allow Fraser to boost its specialty paper business with two products with strong brand recognition, “providing a broader product offering to our publication customers,” said Dominic Gammiero, Fraser’s chief executive officer.

Glenn Saucier, human resources manager for the mills, learned of the announcement Tuesday evening. He said workers would be notified on Wednesday.

“There will be no immediate changes at the mill,” said Serge Sorokin, Millinocket mill manager, when reached at home in Bangor late Tuesday. Sorokin said he expected to discuss the situation with workers informally today.

Millinocket Town Manager Eugene Conlogue said he wasn’t aware of the sale.

Fraser already owns mills in Madawaska, where it has 780 employees, and in Edmundston, New Brunswick, where about 400 people are employed.

The East Millinocket mill, with two machines and 450 workers, produces directory paper while the Millinocket mill, with one machine and 150 workers, makes a specialty paper used in retail inserts, catalogs and magazines, officials said.

Of the two, East Millinocket’s mill is healthier, producing a leading share in the directory market, Fraser President Peter Gordon said earlier this month. 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.

In 2006, Katahdin’s directory business shipped 243,000 tons of high-quality paper to a customer base that included the largest directory publishers in the U.S. market and the Millinocket operation shipped 168,000 tons, Fraser said.

Fraser’s other properties include a sawmill in Ashland and a pulp and paper mill in Gorham, N.H., in addition to properties in Quebec and New Brunswick. Last year, Fraser closed its mill in Berlin, N.H., with a loss of 250 jobs.