Fraser Papers Inc.’s plans to buy an East Millinocket paper mill from Brookfield Asset Management Inc. have fallen through, company officials said Tuesday.

Coming about two weeks after Fraser officials indicated they would not buy a Brookfield-owned Millinocket mill, Fraser shareholders rejected buying the East Millinocket plant, company officials said in a four-paragraph press release faxed shortly before 7 p.m.

“We are disappointed that we were unable to adequately communicate the attributes that this transaction would bring to Fraser and its shareholders,” Fraser President Peter Gordon said in the statement. He did not immediately return telephone messages seeking comment.

If both mills had been purchased as originally planned, Fraser would have paid $50 million plus working capital of about $30 million and royalty payments based on the performance of the supercalendered paper line from Millinocket’s mill.

The shareholders’ rejection will not affect operations at either mill, said Glenn Saucier, Katahdin Paper’s director of human resources and spokesman for Katahdin Paper Co. LLC. Toronto-based Fraser already operates the mills on behalf of Katahdin Paper Co. LLC, which was formed by Brookfield.

“It’s status quo,” Saucier said Tuesday.

The pending sale had raised hopes that the mills would be operational for years to come. Of the two, East Millinocket’s mill is healthier, producing a leading share in the telephone directory market. Millinocket’s mill is less profitable because of operational problems and worldwide competition and is not running at capacity.

Both mills have been reduced from about a dozen paper machines to three as company officials have torn out old or unused equipment, raising fears that mill operations were tenuous. The pending purchase allayed those fears with Katahdin area officials.

Now, Millinocket Town Manager Eugene Conlogue and Town Council Chairman David Nelson plan to meet with Saucier and possibly Mill Manager Serge Sorokin on Thursday to discuss what’s next. Conlogue is still optimistic.

“Except for the initial disappointment that the deal is not going through, I think there is a silver lining here,” Conlogue said Tuesday. “There was a question around Fraser buying East [Millinocket’s mill] without Millinocket’s mill, so I think that it could strengthen the Millinocket mill’s position for eventual acquisition by Fraser.”

Conlogue said he could foresee Fraser buying both mills eventually, despite the stockholders’ rejection. The mills traditionally have been a tandem operation, sharing workers and management, and with East’s mill supplying the other with pulp.

Brookfield could use the time between now and an eventual purchase of the Millinocket and East Millinocket mills to continue its generally successful efforts to strengthen the Millinocket mill’s somewhat shaky position, Conlogue said.

“I don’t think this deal being off the table today is a permanent situation. I hope it isn’t,” Conlogue said.

Brookfield bought the mills out of bankruptcy in 2003.

Fraser and Brookfield officials expressed enthusiasm for the $80 million deal when they announced it in late January. Fraser Papers shareholders, portions of its board of directors and Canadian regulatory agencies needed to approve the deal.

In early February, officials announced Fraser would make several upgrades to the mills. The upgrades included spending $3 million to $5 million over the next year on operational enhancements, including refurbishing an old groundwood and pulping operation and pipeline connecting East Millinocket’s pulping works to Millinocket’s mill. This would increase pulp production from 400 to 500 tons daily.

That enthusiasm did not wane in subsequent conversations with the Millinocket Town Council, according to Chairman David Nelson.

“My understanding of the situation is that they want to have a world-class product coming out of these mills, in coated paper and in director paper,” Nelson said Tuesday. “My relationship [with Katahdin Paper officials] to now has been positive and conversations have been ongoing.

“Before jumping to any conclusions about what this might mean, we must get facts. We must not jump to any conclusions,” Nelson added.

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 supercalendered paper used in retail inserts, catalogs and magazines.