Change looms for York County mill town
When people ask what's in the air in Spring Grove, the answer is as likely to be change as it is the distinctive odor of paper making.
The $360 million deal includes all of Glatfelter’s specialty papers business unit, its largest but least profitable division. The division’s products are used in book publishing, credit-card receipts, envelopes and other applications. It has other factories in Ohio.
Glatfelter said it plans to focus on its other, more profitable divisions: composite fibers, used in food-related products; and airlaid materials, whose markets include health care.
The York County borough where the company was born is focused on what happens next.
About Specialty Papers
As of February, Glatfelter’s specialty papers unit employed 1,795 of the 4,200 people the company employed worldwide. The Spring Grove plant had 750 workers at that time, according to Business Journal records. Last summer Glatfelter laid off 70 employees from its specialty papers unit including 30 in Spring Grove.
Along with the facility in Spring Grove, the unit also includes a plant in Fremont, Ohio and Chillicothe, Ohio, according to Business Journal records.
Sales for specialty papers were $190 million for the three months, ending June 30, according to a filing with the U.S. Securities and Exchange Commission. The unit had an operating loss of $20. 9 million for the quarter.
In comparison, composite fibers had sales of $142.9 million and operating income of $13.2 million for the quarter. Airlaid materials had sales of $72.8 million and operating income of $7.6 million.
Glatfelter will use proceeds from the sale of the specialty papers unit to pay down debt, fund its pending acquisition of a Georgia-Pacific division and for general corporate purposes.
The buyer is Lindsay Goldberg and a newly created company affiliated with the investment firm, Spartan Paper LLC, according to documents filed with the U.S. Securities and Exchange Commission. Lindsay Goldberg has a diverse portfolio of operating companies in a range of industries, including energy, senior living, manufacturing and hospitality.
The firm has said it plans to invest in the Glatfelter operations and has put two paper-industry veterans in charge: Steve Klinger, who heads a related company in Lindsay Goldberg’s portfolio, Crown Paper Group Inc.; and Steve Strickland, an executive at one of the firm’s other companies, Golden West Packaging Group.
“During the evaluation process we identified multiple opportunities for the investment of capital in the mills, designed to increase efficiency and productivity,” Klinger said in a statement in August. “We are proud of our track record of engaging employees, embracing safe work practices, minimizing our environmental footprint, partnering with communities in which we operate, and building high performance paper businesses that exceed customer expectations.”
While Spartan Paper is the name of the entity buying the Glatfelter operations, it is not going to be the name of the business going forward, according to a spokesperson for Lindsay Goldberg.
“Lindsay Goldberg will launch the business under a new name, and will make that announcement at a later date,” the spokesman, Alan Ulman, wrote in an email.
Analysts agreed the plant has a future, despite changes in how – and how much – paper is being used in today’s digital economy.
The sale of Glatfelter’s specialty papers unit resembles moves under consideration by other paper companies, said Scott Mingus, a York County-based management consultant to the pulp and paper industry.
In fact, a number of mills across the U.S. and Europe have started to explore their options as the need for products like copier paper has fallen off, Mingus said. Companies want to focus on niche markets, he said.
“There’s also been a lot of cultural changes that have fueled these market changes. People are reading more on devices versus a hard copy of a book in their hand like they were a generation ago,” said Mingus. “And when a product line declines – without chance of recovering – you need other products to be able to replace them to survive.”
The good news, Mingus said, is there is still a future for the Spring Grove mill and an opportunity to prosper and grow depending on what the new owners do. Glatfelter’s advantage is that it has already been offering diverse products, he said.
One change Mingus does foresee is to the identity of the company and its name.
When Glatfelter bought the plants in Ohio in 2006, it changed their name from MeadWestvaco to Glatfelter. “And I can only assume the same with happen at Glatfelter,” he said.
Employees, meanwhile, are likely to feel a level of uncertainty when going through an acquisition, said Dr. David J. DiRusso, chairman of management and marketing department at Millersville University.
Given the current state of the paper industry, DiRusso said, many will likely be deeply concerned about fundamental shifts in pay, job stability and company culture.
“There is no single clear path forward in the industry, and there are major signs that change is necessary,” he said. “There is increased pressure from Chinese producers, major client industries such as health care are moving away from paper, and consumers use it less for a variety of reasons. Any new strategy to boost demand is going to be fragmented since today different buyers are looking for very different paper products and have different price sensitivities.”
Some paper buyers are willing to pay higher premiums for paper goods, he added, noting that the consumer greeting card market is still strong despite increased prices and competition from digital alternatives.
Industrial customers, on the other hand, will still be concerned with keeping the cost of using paper as low as possible. Still, others are concerned with new innovative uses of paper to help them differentiate their products, DiRusso said.
“The Glatfelter specialty paper division is in a good position to serve these various markets as they produce a wide array of paper products,” he said. “But continuous innovation is going to be necessary.”