Luke papermaking plant, others being sold by Mead

THE BALTIMORE SUN

MeadWestvaco Corp. said yesterday that it is selling its papermaking business, including a Western Maryland mill that is the second-largest private employer in Allegany County.

State and local officials believe the $2.3 billion sale to Cerberus Capital Management LP, a private investment firm in New York, will have little impact on the county. The business might be better off separated from MeadWestvaco's packaging operation, they said.

"I was concerned when I heard the news, but after talking to the management team, I'm very comfortable that we will continue to have stability in this facility," said Aris Melissaratos, the state's secretary of business and economic development.

"They're kind of excited about getting more control over their own destiny," Melissaratos said, "so they felt very good about the move."

The company's mill in Luke, which makes glossy printing paper, employs nearly 1,200 people. Several hundred jobs have been cut there since Westvaco Corp. merged with Mead Corp. three years ago.

The mill was opened in 1888 by Piedmont Pulp and Paper Co., which later became West Virginia Pulp and Paper Co.

Luke, population 80, is a classic company town tucked beside the West Virginia line: Named after the corporate founders, its operating revenues come almost entirely from the taxes MeadWestvaco pays. The company is Luke's only private employer.

Residents don't know what the sale will mean, but they can't help worrying.

"Without our neighbor over here, we don't exist," said Joseph W. LaRue, mayor of Luke and a former mill employee. "It's scary, in other words."

The company's contract with PACE International Union, which represents most of the mill employees, won't expire until 2008, said Thomas Caldwell, president of Local 2-676.

"Hopefully we can turn this into something positive," he said of the sale. "Business is starting to pick up ... even though we have to deal with competitors such as China."

MeadWestvaco said it couldn't "speculate" on the future of the mill, but it noted that the papers division management team will remain with the business as it splits off into a separate company.

Peter H. Vogel Jr., current president of the division, will become chief executive of the new company.

"It's really well-positioned to compete," said Daniel McIntyre, a MeadWestvaco spokesman.

The paper business generates $2.3 billion in annual sales - exactly what Cerberus is paying to acquire it. The buyer said it couldn't comment on the mill or other specifics until the sale closes, likely in the spring.

"Cerberus is a company that invests in companies that they feel have tremendous potential, and they tend to be long-term investors," said Richard C. Auletta, a Cerberus spokesman.

Though employment is improving in Allegany, the county is still struggling economically. The jobless rate averaged just under 7 percent last year through November, compared with 4.1 percent statewide.

But the county has had a run of recent good news. This month, two businesses opened outposts in Allegany - an American Woodmark Corp. cabinet manufacturing plant that eventually will employ 500 and a 50-person call center run by Zegato Solutions Inc.

The county is beginning to talk about the possibility of a problem that would have been unthinkable in the past generation: work force shortages.

"We're attracting more businesses," said Barbara Roque, a county commissioner, "and I think this area is poised to grow."

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