New Page Faces 21st Century Economic Realities
At any given hour, log trucks are moving quickly through the small town of Clinton, Kentucky on their way to the New Page pulp plant at Wickliffe, Kentucky. For the people of many small towns in West Kentucky and Tennessee, the economic realities of log trucks are how many logs per truck load can be safety transported to New Page.
Old timers know the pulp plant acreage as Westvaco. During the 1990’s, Mead Corporation bought out Westvaco. Now, the plant is named New Page. A casual visitor or passer by will see large mountains of sawdust or logs stacked high, waiting to be process into various sizes and quality of paper.
The strength and importance of the New Page facility is that the equipment for processing paper can be easily changed for settings without major re-alignment. This is a large advantage for keeping this plant open. However, the future of this plant and the entire paper industry is facing a major crisis.
The reading habits of millions of Americans are changing from print medium platforms to electronic media platforms. The two worst hit paper markets are newspapers and magazines. Americans want breaking news in short bursts of text upon blogs, iPods, cell phones or Amazon.com’s electronic reader, the Kindle. With new gadgets in hand, the reading public is moving quickly away from the legacy daily newspapers in large cities. A similar fate is falling on magazine publishers.
According to Editor & Publisher news service, reported in late 2008, dire figures for print industry advertising. Gannett Co. (USAToday), McClatchy Co., New York Times, and Journal Communications had disappointing numbers.
“In the third quarter (2008), Gannett advertising revenue for publishing, which includes newspaper Web sites, fell nearly 18 percent. The drop was about 16 percent at the times, 19 percent at McClatchy and nearly 14 percent at Journal Communications.”
Without ads, the business model for newspapers and magazines fails. The future of how people read and obtain news will determine the future of New Page plant at Wickliffe, Kentucky. If demand keeps dropping for paper, the owners of New Page will be faced with selling off the assets or taking a company write off. Unfortunately for West Kentucky, that decision will be made in New York City.
Who Owns New Page?
The recent worker layoff and work slowdown at paper mill NewPage in Wickliffe had us wondering who owns the company now. It has changed hands and names several times in the last several years. A company spokesperson at NewPage confirmed the present owner is Cerberus Capital Management, L. P. since 2005.
- According to Wikipedia and research done by One Angry Mom, Cerberus Capital Management, L.P. is one of the largest private equity investment firms in the United States. The firm is based in New York City, and run by 48-year-old financier Steve Feinberg.
- Founded in 1992, Cerberus is named for the mythological three-headed dog that guarded the gates of Hades. While many of its peers have bought out companies in order to strip assets and sell on for a profit, Cerberus builds its reputation on identifying firms that are undervalued, and assisting in rejuvenating them by working with current management. Feinberg has stated to his employees that while the Cerberus name seemed like a good idea at the time, he later regretted naming the company after the mythological dog.
- The company has been a very active acquirer of businesses over the past several years and now has sizable investments in automotive, sportswear, paper products, military services, real estate, energy, retail, glassmaking, transportation, and building products. In 2006, its holdings amounted to $24 billion.
The firm has some famous connections. Former U.S. Vice President Dan Quayle has been a prominent Cerberus spokesperson and runs one of its international units.
On October 19, 2006, John W. Snow, President George W. Bush's second United States Secretary of the Treasury, was named chairman of Cerberus.
* Pharmaceuticals - In December 2004, the company announced the acquisition of Bayer's plasma products business and renamed it Talecris Biotherapeutics.
* Paper products - The company acquired MeadWestvaco's paper business for $2.3B in 2005 and renamed it NewPage Corporation. Cerberus also purchased, from Georgia Pacific Corporation, its Distribution Division/Building Products and all of its associated real estate. It renamed this new company BlueLinx Holdings, based in Atlanta.
* Government Services (Military, Energy, and Food & Drug) - owns IAP Worldwide Services, which bought Johnson Controls' World Services division in February 2005, and Netco Government Services.
* Real Estate - Through investment affiliate Cerberus Real Estate, the company has been making direct equity, mezzanine, first mortgage, distressed and special situation investments in all asset types. It also controls Miami Beach.-based LNR Property, a large real estate development and investment firm through subsidiary Riley Property. Cerberus also controls Kyo-ya, a Japan based group of entities that owns several Starwood managed assets in California, Hawaii and Florida.
* Retail - Cerberus purchased 655 of the 2,500 Albertson's, Inc., grocery stores, forming Albertsons LLC of Boise, Idaho, in June 2006. They also own Mervyn's department stores, which was acquired from Target Corp. In June 2007, Cerberus acquired Torex Retail Plc., a retail solutions provider in troubled waters, for approximately 400 million US dollars.
* Transportation - Acquired bankrupt ANC Rental, owner of the National and Alamo car rental chains, for $230 million in October 2003 and purchased DaimlerChrysler's 45% share of debis AerFinance, an aircraft leasing business, in May 2005. Complete acquisition of debis AirFinance (later renamed AerCap) was concluded in July 2005. Also acquired North American Bus Industries, Optima Bus Corporation, and Blue Bird Corp. in the bus manufacturing sector. Cerberus also owns bus companies Coach America and American Coach Lines, which were acquired from Stagecoach Group.
* Automotive - Peguform, GDX Automotive, and Chrysler.
* Financial Services - General Motors sold a 51% stake in its GMAC finance unit to an investor group led by Cerberus Capital Management in November 2006. GM expected to receive $14 billion over the next three years from the sale of General Motors Acceptance Corp. In December 2006, Cerberus acquired the Austrian bank BAWAG P.S.K. for a reported EUR3.2 billion. In August 2007, Cerberus announced that it was closing one of their mortgage companies, Aegis Mortgage.
* Firearms - Acquired Bushmaster Firearms, Inc., from Windham, Maine native Dick Dyke for an undisclosed sum in April 2006, and purchased Remington Arms in April 2007. Under Cerberus direction, Bushmaster Firearms acquired Cobb Manufacturing, a well-respected manufacturer of large-caliber tactical rifles in August 2007. Cerberus also announced the acquisition of DPMS Panther Arms in December 2007. Remington Arms acquired Marlin Firearms in January 2008.*
- Entertainment - Acquired a group of seven television stations, Four Points Media Group, from CBS Corporation in 2007.and cable operator Galaxy Cable which operates cable services in West Kentucky.
* Other holdings of the investment group include Formica, Inc., and the Aozora Bank in Japan;
* In 2007 Cerberus took over Corvest a promotional products company based out of Largo, FL with arms based in Simi Vally, Ca & Thorfare, NJ.
- For more on the company, go to their webpage Cerberus Capital.com