PCA plans to buy Boise and faciilities

PCA Executive Chairman Paul Stecho said the acquisition of Boise is an excellent fit, both geographically and strategically, with unique substantial synergies.

Stecho pointed to the containerboard that PCA needs to support its corrugated products growth and said Boise’s DeRidder, La., containerboard mill is low cost, located in a very good wood basket and, provides almost 1 million tons of primarily lightweight containerboard.

“The combined company is expected to pay down debt as well as to continue to return value to our shareholder,” he said.

The deal, expected to be completed in the fourth quarter of the year, comes with Boise’s $714 million of outstanding indebtedness. Should the acquisition move forward with shareholder and regulatory approvals, the combined companies would generate $5.5 billion in annual revenues, $879 million in profits and cut about $105 million in annual costs, which the news release calls “expected synergies” over three years.

A call to PCA’s Chief Financial Officer Rick West about how the sale of Boise will impact the International Falls mill was not returned in time for this publication.

Boise Chief Executive Officer Alexander Toeldte said PCA’s desire to acquire Boise is a “testament to the performance delivered and dedication shown by our employees in our five years as a public company, and the value we have created in a very challenging economic environment.”

Toeldte said the sale will enhance opportunities for even stronger customer service.

Virginia Aulin, Boise vice president of human resources and corporate affairs in Boise, Id., said the operation of the local mill after Monday’s announcement to the closing of the deal will continue to be “business as usual.”

While she said she could not speculate on any changes to the local mill after it is owned by PCA, she said PCA officials have said the paper unit is a part of their strategic business unit.

“They will be largely a packaging company, but they said they will need our talent,” she said. “In the conference call with shareholders, they talked about being papermakers themselves in their careers and are looking forward to working with Boise on the paper side of the business.”

Boise has been moving toward more packaging and has recently purchased a number of smaller packaging units, which some have said may be attractive to PCA.

Headquartered in Lake Forest, Ill., PCA is the fourth largest producer of container board and corrugated packaging products in the United States with sales of $2.8 billion in 2012. PCA operates four paper mills and 71 corrugated product plants in 26 states.

Boise manufactures a wide variety of packaging and paper products, ranging from linerboard and corrugating medium to protective packaging products. Its paper products including copy paper for the office and home, printing and converting papers, and papers used in packaging, such as label and release papers.

Just a few days before the announcement of the sale of Boise, International Paper Co. said it plans to close its largest U.S. paper mill, in Courtland, Ala., eliminating 1,100 jobs.

The closure of the IP mill may bode well for the future of the paper mill in International Falls, some have said. IP officials cited shrinking demand for paper in an increasingly digital world.

Local optimism

International Falls Mayor Bob Anderson said there’s been a great deal of speculation about the sale of the assets of Boise paper and the Falls mill.

Anderson brings insight to the transaction as mayor and as paper mill employee for more than 50 years.

“Certainly Packaging Corporation of America is a paper company, so that is a very good move for our mill,” he said Monday. “They know paper and they understand the paper industry. I feel fairly confident in this announcement.”

In May, Boise said it would cut 265 positions at the Falls paper mill, and another 30 in the corporation, shut down two paper machines and a coating machine, in an effort to be more competitive and stabilize the remaining 580 jobs at the mill. Anderson serves on an economic response team developed to consider ways to address community needs created by the job loss.

Anderson said the purchase by PCA could add stability to the operations here. “Certainly, we need to as a community do everything we can to support the 580 jobs that are here.”

Community officials are considering ways to do that and are working with mill officials now on wetland issues that he said could be helpful to the company.

Koochiching County Commissioner Rob Ecklund, also a member of the economic response team and mill worker, said he did a little homework on PCA before commenting to The Journal.

“What I found about PCA that makes me feel somewhat better is that it has a terrific record for dealing with organized labor,” he said Tuesday morning. “They are fair and quickly negotiate labor contracts.”

In addition, he said he’s found that PCA is a “big company with better assets than what Boise had. Boise being owned by bankers, more or less on paper and PCA being fairly large with assets across the country.”

What is a little concerning for Ecklund, he said, is that PCA is not much of a player in the uncoated free sheet market.

“So it will be interesting to see how they plan to integrate the white paper Boise has,” he said. “According to the announcement they are going to do that, but I guess two out of three (of my concerns) ain’t bad.”

Ecklund said the time between Monday’s announcement and the close of the deal gives the company time to figure out “if they are looking at doing something different with these mills.”

Bob Walls, business agent for the International Associations Of Machinists And Aerospace Workers 33, said Monday morning it was too early to comment about the purchase and how it might impact local workers.

Minnesota Rep. David Dill said the purchase of Boise is not unusual to business in the nation and the wood products industry, but said “when it comes to your hometown, it makes people stop, think, take a deep breath and wonder what’s next.”

Dill, DFL-Crane Lake, said he’s praying PCA understands and knows the value of the Falls paper mill, it’s workers, and extending to the suppliers, and wood harvesting industry — all the things and people needed to make a mill operated. And he said, he is hoping PCA seeks to improve or add value to the products made in International Falls.

Dill called The Journal Tuesday morning as he waited to cross the bridge from Fort Frances into International Falls. He said he was watching the logging trucks passing by, symbolizing the value of the wood products industry to the region.

Sen. Tom Bakk, DFL-Tower, could not be reached for comment, and Dill said he was moose hunting in Canada. But Dill pledged that he and Bakk would do all they could at the state level to keep workers compensation rates as low as possible for all, keep the cost of operation low, and continue programs like the Sustainable Forestry Incentive act “and do that by having adequate amount of county program aid, which lowers taxes, and PILT (payment in lieu of taxes) to counties to lower taxes and local government aid, which goes to cities to reduce taxes.”

“Those are the things we can do to help at the least and we welcome suggestions for more ways that we can help,” said Dill.

Dill acknowledged the uncertain feelings of the community after Monday’s announcement and the anticipated job loss at the mill. But he said recalled “the shaking of the Earth” the day Boise announced the shut down Insulite in the early 1980s. Since then, he said, the industry diversified somewhat, other plants started up in the area “and the world kept turning.”

A good thing, he said is that PCA is no stranger to the type of products Boise has made.

“We will meet with them and be stressing the quality and integrity of the work force and the vast resources we have in northern Minnesota to feed the paper mill and tell them that we’re committed to do everything possible to keep the costs of business competitive with other states and countries,” said Dill.

U.S. Sen. Al Franken told The Journal he would “reach out to the Packaging Corporation of America and will monitor the progress of the acquisition, and any effects it may have on employees in Minnesota.”

U.S. Sen. Amy Klobuchar said in a statement to The Journal that the Falls paper mill is incredibly important to the community.

“I have been in contact with Boise’s CEO and the Packaging Corp. of America and my office is working to help ensure that workers and the community have the support they need moving forward,” she said.