‘Legendary’ hedge fund aims at Clearwater share prices, CelluTissue buy
A hedge fund run by a “legendary” money manager, SAC Capital Advisors, which holds more than 7% of Clearwater Paper’s (CLW) outstanding common stock, told CLW’s top executive that “there may be significant strategic interest in some or all of the company’s assets that could provide additional value for shareholders.”
In a letter sent to Clearwater chairman and chief executive Gordon Jones, SAC Capital said that Clearwater’s shares could be worth 37% to 112% more than its stock price on 1 May.
SAC credited Clearwater’s recent sale of a lumber operation, and said that the firm’s halfbillion- dollar acquisition of CelluTissue at the end of 2010 put Clearwater in a “net short position on pulp of approximately 450,000 tons. “The timing of this was unfortunate as pulp prices have since increased,” according to a media report of what was stated in the letter.
Market pulp pricing in the USA hit record levels, unadjusted for inflation, in mid-2011. With CelluTissue, Clearwater became the sixth largest tissue paper producer in North America, and further is in the process of starting up a new through-air-dried tissue paper machine by yearend in Shelby, NC. With CelluTissue and the Shelby PM, the company expects to continue growing from its position as No. 2 ranked private label supplier in North America, based on shipments.
A Clearwater official said that the company’s board of directors and management team are “fully committed to acting in the best interests of the company and its stockholders” and “we continually review the company’s strategic priorities and opportunities to enhance value, and we welcome and value the opinions of all stockholders.”
“Clearwater Paper is committed to maintaining an open dialogue with its stockholders, and as always, we are very focused on our operations and serving our customers and supplying them with great product,” the official said.
Steven A. Cohen (SAC), a “billionaire hedge fund manager,” founded the hedge fund, according to Forbes.
“He’s legendary,” D.A. Davidson analyst Steven Chercover said in the media story. “He’s one of the biggest and the best.” A Seeking Alpha report this week said Cohen’s net worth was about $8.3 billion, making him the 106th richest person in the world. Based on market data from Finviz, Morningstar and MSN Money, and hedge fund holdings from Insider Monkey, the report identified Cohen’s six stocks that have a dividend yield of more than 4.5% as including BP, ConocoPhillips, Exelon, PPL, Entergy, and Cablevision Systems.
Last year, Starboard Value, a large shareholder in Wausau Paper, pushed for changes in the company before Wausau sold its print and colour paper business and shut a mill.
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Kimberly-Clark chief executive Falk reiterates capacity cut at Chester, PA, tissue mill; no date, capacity noted
After closing its 200,000 tpy Everett, WA, tissue paper and pulp mill this year, Kimberly- Clark’s (K-C) top executive confirmed that additional tissue paper capacity will be closed, most likely a tissue paper machine at its about 250,000 tpy Chester, PA, mill, company president and chief executive Thomas Falk said.
Falk, who had first acknowledged a capacity reduction at Chester earlier this year, told analysts that “we’ll probably take one machine out of Chester, and it’ll be a smaller number by far than what was done at Everett,” based on a Seeking Alpha transcript of the company’s call with analysts on 23 April. Falk provided no date for the closure and no annual capacity total for the PM that would be shut. The Chester mill runs five PMs, including the No. 19 that is through-airdried and makes bath tissue and towel paper, according to RISI’s Analytical Cornerstone Service, which follows mill costs globally. All five PMs make bath tissue paper, with PM 16 the smallest at about 20,000tpy and the only one that also produces napkins. Two other PMs, Nos 12 and 17, each run about 45,000tpy of capacity. The two oldest PMs at the mill are Nos 12 and 16, which began in 1934 and 1939, respectively, according to analytical cornerstone. The mills on the list were SCA’s 107,000 tpy Edet mill and Metsä Tissue’s 81,000 tpy Katrinefors mill, the 26,000 tpy Nyboholm plant and the 24,000 tpy Pauliström facility.
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Atlas’ Soundview Paper acquires Marcal; new CEO adds in virgin output with continued recycled drive
Under new ownership, the former Marcal tissue paper mill in northern New Jersey will start running some virgin pulp to make tissue paper while advancing business in private label and continuing to push its 100% recycledcontent Small Steps line, the company’s new chief executive has said.
The production shift occurs after Atlas Holdings subsidiary Soundview Paper acquired Marcal from Highland Capital Management on 21 April.
It is the private equity firm Atlas’ first mill entry into the 9 million tpy North American tissue sector.
Connecticut-based Atlas is already established in the industry, with assets in containerboard, boxboard, and printing and writing papers.
For tissue, Soundview Paper chief executive George Wurtz stressed to PPI Pulp & Paper Week that his goal in the second half of this year is a 16% increase in output from the 120,000 tpy mill that runs two conventional machines in Elmwood Park – and to increase efficiency and profitability.
Toward that end, Wurtz said Soundview Paper just gained a piece of private label business with Home Depot that requires virgin pulp furnish. He said both PMs at the mill can run virgin even though the mill has produced recycled content tissue paper for at least the last 20 years.
Wurtz, a former Georgia-Pacific (G-P) executive, didn’t identify virgin pulp suppliers and Soundview will not purchase virgin parent rolls, but a former G-P mill in Old Town, ME, produces northern bleached hardwood kraft, contacts said.
Also, other major softwood and hardwood producers in the north east include Domtar, Resolute Forest Products, and Sappi, a contact said.
“Whatever channel we’re able to possibly compete in, we’ll do that,” Wurtz said. Some 80% of the former Marcal’s products were for at-home, consumer tissue products, RISI’s Cornerstone Benchmarking Services reports. Wurtz wouldn’t be specific on Soundview’s production plan, noting that the firm’s focus will be on both at-home/consumer and away-from-home segments.
“Our first objective is to optimise the assets,” said Wurtz, who added that Soundview Paper would “not invest a lot of capital.” Several market contacts claimed an issue for Soundview might be what they consider to be a product marketing/promotional position stuck between brand and private label. Asked if Soundview could grow business in private label, Wurtz said: “We think so.”
In the USA, private label tissue products compete heavily with brand products. Potentially, four of the five new through-airdried (TAD) PMs that started up or will start up in the USA from late 2010 through the end of this year are for private label products, including Clearwater’s new TAD in Shelby, NC, and First Quality’s second new TAD in two years in Anderson, SC.
Soundview Paper pledged to continue Marcal’s Small Steps branding. The firm under former chief excutive Tim Spring undertook a $30m promotional campaign for Small Steps that emphasised Marcal’s 100% recycled content tissue paper including in television advertising.
For the recycled content output, Wurtz said the two Marcal PMs would continue to be fed pulp made mainly from office paper as well as from pulp substitutes. In 2010-2011, office paper (in 2011) and pulp subs (in 2010) reached their highest price levels ever for US mills, unadjusted for inflation, according to P&PW.
‘Tough share’ turnaround
“Marcal was in pretty tough shape,” said Wurtz when the deal was first announced. “We acquired the company because we think we can make it profitable.”
Wurtz said “no comment” when asked if the mill was profitable last year. Along with product focus, Wurtz said a key is properly lining up output from the machines “based on (their) OEM (Original Equipment Manufacturing) capability.” He has industry veterans overseeing production, including Timothy Crawford, formerly with G-P, International Paper, and MeadWestvaco, and who once ran G-P’s Port Hudson, LA, tissue and uncoated freesheet paper mill, and Karl Meyers, formerly with Fort Howard and G-P in Muskogee, OK, and who is now a senior executive in charge of Soundview’s deinking, converting, and logistics. Crawford is VP of operations. Also, Joe Broz, formerly with Procter & Gamble, Potlatch, James River, and G-P is a senior executive adviser for paper mill utilities and maintenance.
“It’s kind of like getting the old band together,” said Wurtz referring to his group in charge of operations. Wurtz has been in the paper industry for around 30 years, including with James River for eight years as Senior VP of operations, Fort James for six years as Senior VP operations, G-P for four years as an Execitive VP, Duro Co for one year as a consultant, WinCup as president/CEO for nearly five years, New WinCup Holdings for five years as president/CEO, and GWW & Associates for seven months as president/ CEO.
Wurtz replaced Fred Smagorinsky, who replaced Spring several years ago. Smagorinsky retains a seat on the company board. For Marcal, Atlas’ Soundview Paper apparently won out over Cascades, the fourth largest tissue paper producer in North America that operates with an almost 100% recycledcontent product portfolio, contacts said.
Since 2007, North American tissue paper consolidation has been limited, while capacity growth moved at a relatively break-neck pace on new TAD-dominated capacity in line with market growth of about 1.5-2% a year on average. US tissue paper demand increased sequentially in 13 of the last 15 years. Of the tissue segment deals in the last five years, Cascades in 2007 acquired the Atlantic Packaging consumer products business with two tissue PMs with combined capacity of 55,000 tpy in Scarborough and Whitby, ON. In 2010, Clearwater Paper, North America’s largest tissue paper supplier to the private label grocery business, acquired CelluTissue for about $500m. This move put Clearwater into the No. 6 rank in North America, and prominently expanded its private label grocery business into the US east, south, and midwest. Previously, the company had no tissue paper capacity east of Lewiston, ID, and Las Vegas, NV. Last year, Cascades paid around $60m for the remaining 50% share in Granby, QC, converter Papersource Converting Mill Corp, which consumes about 90,000 tpy of tissue paper.
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Samtai to start up tissue mill in Brazil in October
Taiwanese investors are building a tissue paper mill in Paulínia city, São Paulo state, south east Brazil, aiming to reach a 3,000 tonnes/month output.
All licenses required for the operations have been already obtained and startup is expected for October. The investors’ company works in Brazil under the name Samtai. The group also owns the tissue producer Papelera Samseng in Argentina. Currently, Samtai has a converting facility in Araucária city, Paraná state, southern Brazil, consuming paper reels produced by Samseng and supplying products only to corporate clients.
“With the new mill in Brazil the idea is to completely separate Samtai and Samseng operations,” a source stated. Samtai acquired two paper machines from ABK Italia (formerly Over Meccanica, now managed by the French ABK group).
According to contacts, the first PM was shipped to Brazil in November 2011 and the second in February. Estimated total capacity of the new mill in Brazil would be 35,000tpy, yet a source stated that Samtai’s objective is to reach a 5,000 tonnes per month output, which seems to refer to the phase when both PMs are operating. This output could be achieved sometime in the next year. The new tissue mill will consume only virgin pulp in order to offer high quality products.
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Santher launches new distribution centre
Brazilian tissue producer Santher has launched a new distribution centre in Arujá city, São Paulo state, under a Real 10m ($5.4m) investment.
The new unit will initially operate with 11 warehouses and 33 docks, shipping the company’s toilet paper, diapers, handkerchief and towels. Santher stated that it has been analysing the transfer of some product lines from its Bragança distribution centre, also located in São Paulo state, to the new site in order to reduce costs and optimise logistic operations.
SCA boosts presence in South America with PISA buy
SCA has boosted its presence in South America after it acquired the remaining 50% in Chilean hygiene company PISA (Papeles Industriales) for SEK 520m.
SCA has had a 50% ownership of PISA as of 2003 and now owns 100% of the business.
Don Lewis, president of SCA Americas, told TW: “Latin America is a big growth region for SCA, and the PISA acquisition is a good strategic fit for us since we have a clear strategy to grow in there.
“Chile is an important market in Latin America and before this transaction we already had a 50% share in PISA, so the acquisition strengthens our foothold in a very interesting market.
“SCA aims to grow our business in Chile. We see an opportunity to achieve this, particularly in the AfH sector of the market.”
PISA primarily operates in the consumer tissue and Away-from-Home sectors, which represent 70% and 30% of its SEK 780m turnover.
PISA holds a number two position in consumer tissue with the brand Favorita.