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Employees were described as shocked and sad after today's announcement that Potlatch's Brainerd mill, with 660 employees, will close in 60 days.
Potlatch announced a sale agreement of its coated fine paper business to a South African corporation for $480 million in cash. The sale to Sappi Limited, a coated fine paper business based in Johannesburg, is expected to finalized in mid- to late May but still has to undergo reviews, such as regulatory approval.
The agreement calls for the sale of Potlatch's Cloquet pulp and printing papers facilities and associated assets to a Sappi Limited subsidiary. Potlatch stated it will leave the coated printing papers business.
"We will be seeking a buyer for the plant," Mike Sullivan, Potlatch director of corporate communications in Spokane, Wash., said today. "We are going to make an honest and good faith effort to find a buyer."
But Sullivan added Potlatch agreed to a non-compete clause and cannot sell the plant to a competitor who would produce coated paper. Sullivan said it was inappropriate to speculate on the chances of locating a buyer for the Brainerd mill.
"We are engaged in a feasibility study to find out what the options are," he said.
Sullivan said Potlatch intends to shut the mill down in 60 days but that could change depending on what Sappi wants. Rumors have circluated months about Potlatch's future, potential sales and closing of the Brainerd mill. Rumors were fueled by the company's quarterly reports of financial losses.
In 2001, Potlatch's printing papers segment reported a loss of $36.7 million on revenues of $464 million.
Frank Carroll, public affairs director for Potlatch's eastern region, spoke quietly this morning from the Brainerd mill. Carroll recently moved to Cloquet from Idaho. He said employees were shocked and sad as they heard the news.
"They are all asking the question, 'What about me?'" Carroll said. "We are going to do everything we can to help people transition into new jobs."
Carroll said some people suspected this eventuality, others did not want to contemplate the closing and remained hopeful. But Carroll said all employees were aware of how much investors had struggled.
"They have been papermakers for a long time and they knew that things were tough," he said.
Carroll said the employees did everything they could humanly do to keep the operation going.
"These are the best papermakers that have ever lived and they did the best they could do," Carroll said. "Everybody here did a brilliant job. It's very sad. It's been an almost continuous operation for 90 years. They made everything here from newspaper to wallpaper to the finest paper every made -- literally the finest paper made by anybody."
Potlatch retains its timberland and wood products operations. The sale is specific to the Spokane-based company's printed papers division. Some of the coating equipment at Brainerd will also be going to Sappi.
Sappi reported the transfer of the business from Brainerd to its other mills in North America and Europe will create a stronger position and profitability for its operations.
Sullivan said the sale was precipitated by the foreign competition and industry consolidation in the last few years.
"Potlatch has become a relatively smaller player," he said. "That makes it more challenging for us to compete."
Sale of the coated printing papers is part of Potlatch's strategic plan to increase shareholder value by focusing on businesses with the greatest growth potential, Potlatch Chairman and Chief Executive Officer L. Pendleton Siegel stated in a new release.
Information on potential severance packages was not released. Potlatch human resources staffers were at the Brainerd mill this morning informing employees at 6:45 a.m. The deal for the sale was signed and completed in the early-morning hours.
Potlatch contacted the Displaced Workers Program in St. Paul today. Paul Moe, director of the Minnesota Displaced Workers Program for the Department of Trade and Economic Development, said today he notified the program's rapid response team. Moe said large dislocations of workers in smaller communities is often more troubling because it is harder to absorb the employees.
The rapid response team has five members who typically set up informational meetings for displaced employees. The team works with the company and union leadership to establish training needs with a goal of moving people back into the work force as quickly as possible.
"When these layoffs happen in communities such as Brainerd, or in LTV for example in Hoyt Lakes, it is just so devastating," Moe said.
From Northwest to Fingerhut to Kmart, Moe said the state has been facing massive layoffs at record-breaking numbers. He said the there is a legislative proposal to transfer $16 million to the Dislocated Workers Program budget.
"The good news then for Potlatch employees who are about to face dislocation of layoff would mean we'd have those funds to work with," Moe said.
Carroll said the 60-day notice is a positive as it helps people and state agencies plan.
"It's very hard," Carroll said. "But it's not like Enron. People are not sitting outside with their lives in a box and wondering what is happening to them.
"We are going to do things like help people with resume and job services and employee assistance and we have employee assistance on site right now to handle counseling. Right now we are very concerned and we are going to do everything we can to help everybody -- remind them that the sun is going to rise tomorrow morning."
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