Paper Industry Merging

Article excerpt

Byline: Walter C. Jones, Times-Union staff writer

ATLANTA -- Mergers and acquisitions are likely in the pulp and paper industry, and older, unprofitable mills such as Durango-Georgia Paper Co. will continue to shut down, experts predict.

"This industry is ripe for consolidation," said Kai Korhonen, president of Stora Enso's North American subsidiary. The field is more fragmented than most other mature industries, he said.

Korhonen, a senior executive with the world's second largest forest-products company, said his corporation is seeking acquisitions. He estimated the merger trend begun in the 1980s will continue for the foreseeable future.

Hundreds of paper-making machines have been shut down in the United States and nearly 20,000 jobs eliminated since 1999, most recently when Mexican-owned Durango fired 900 people and closed its St. Marys mill.

Stora Enso closed a Wisconsin mill at the same time, laying off 290.

Customers, investors and competition are driving the trend, industry analysts say. Customers, like AOL Time-Warner, the world's largest publisher of magazines, are becoming multinational behemoths themselves and want to deal with vendors that can supply international locations. At the same time, investors in an industry suffering its worst financial spell since World War II are demanding better returns that should result from the efficiencies of consolidation.

Competition from Asia and Latin America is also spurring European and North American firms to merge.

Many of the Western companies rushed to build mills in the 1980s in hopes of capitalizing on the emerging Asian economies, and they were stuck when those economies tanked in the late 1990s. Soon the industry had too much manufacturing capacity. Subsidies by Asian governments also made competing difficult just as a strong dollar made American exports more expensive. …