Verso is selling its paper mill in Jay to a specialty paper producer in Pennsylvania as part of a $400 million deal that also includes a mill in Wisconsin.

Verso announced the agreement Tuesday morning with its quarterly earnings report. It wasn’t clear Tuesday whether the proposed sale would affect the 500 workers at the Androscoggin Mill in Jay, which has been producing paper in the area since 1885 through multiple ownership changes.

The Verso paper mill in Jay has been sold to a Pennsylvania company that manufactures and supplies specialty papers. Andree Kehn/Sun Journal Buy this Photo

The buyer, Pixelle Specialty Solutions, is a privately held company in Spring Grove, Pennsylvania, that manufactures and supplies specialty papers and engineered products. The sale, which includes the Verso mill in Stevens Point, Wisconsin, has been approved by the Verso board and is expected to close early next year contingent on a shareholder vote and regulatory approval.

The move comes as Maine’s paper industry is repositioning itself from its historic role as a producer of glossy, coated papers used primarily in publishing and marketing industries to making packaging materials for a growing shipping industry.

Just four months ago, Verso planned to upgrade two paper machines in Jay to make specialty products, part of a $120 million investment at three of its mills.

But that plan was shelved when Pixelle approached the company with a purchase offer, former acting CEO Leslie Lederer said in Tuesday’s earnings conference call.

“The offer and the preservation of capital we could deploy to other mills made the transaction that much more favorable to us,” Lederer said.

Verso, with funding from the state of Maine, invested $17 million to convert its No. 3 paper machine in Jay to make packaging products. The machine restarted last year, bringing back 120 mill jobs.

Lederer said he could not comment on whether the machine’s performance was a factor in Pixelle’s interest in the mill. The machine is very effective, but container board prices have been low, he added.

“We would have been more than happy to receive better pricing, but the operational side of No. 3 has been excellent,” Lederer said.

Graphic, or publishing, paper will make up 70 percent of Verso’s revenue after it completes the sale, up from 59 percent this summer. The company will continue a strategic assessment of operations at four remaining mills in Michigan, Minnesota and Wisconsin.

In Tuesday’s filing, the company reported $616 million in revenue for the quarter ended September 2019. That compares with $704 million from the same quarter a year ago.

Buying the two mills will make Pixelle the largest specialty paper business in the U.S. in terms of annual production, according to a news release. The company was formed last year by Lindsay Goldberg, a private investment firm.

After the sale, it will operate four mills – the one in Jay, plus mills in Chillicothe, Ohio; Spring Grove, Pennsylvania; and Stevens Point, Wisconsin – with a total of 12 paper machines and the capacity to produce more than 1 million tons of paper annually.

“We are excited about the opportunities that these mills present to us, and will fully analyze all of the capabilities of the mills after the closing of the transaction before making any decisions,” Pixelle President Tim Hess said. “With Lindsay Goldberg’s resources, industry experience and management talent, combined with Pixelle’s skilled workforce and world-class assets, we are building a high-performance, specialized business for our customers.”

He declined to say if there would be any workforce changes at the Jay mill, or if the new owners planned a capital investment there similar to Verso’s plans, while the transaction awaits approval from Verso shareholders.

Pixelle looks to be moving fast to take a major share of the specialty paper market which should be good news for Maine’s loggers, said Dana Doran, executive director of Professional Logging Contractors of Maine.

“It appears that in the last year, they have secured assets directly related to specialty paper and are trying to be a global leader in that perspective,” he said.

A wave of paper mill closures since 2011 and the shutdown of the No. 3 paper machine at the Jay mill in 2015 crippled the market for softwood pulp lumber, Doran said. After Verso upgraded and restarted that machine last year, it was a glimmer of hope for Maine’s loggers amid otherwise bad news. Selling the mill to Pixelle means it will continue to be a major Maine pulp customer, Doran said.

“It shows investment in the state of Maine, our resource, and hopefully for logging contractors it gives some sense of stability moving forward,” he said.