Tullis Russell Still Hopes for Last-Minute Buyer to Operate Mill

 

Earlier this month, a reporter for The Scotsman, Edinburgh, Scotland, U.K, found that some of the 72 previous potential buyers who passed over on purchasing the downsized, employee-owned, yet (still at the time) fully operational Tullis Russell paper mill, specializing in newsprint and rich with a 200-year history, are taking a serious second look at purchasing assets and, in the eyes of administrators, preferably ongoing operation of the company. This could mean potentially restarting production of paper products. However, the mill is currently being shut down, though not dismantled, as part of the agreement when the company went into U.K. administration –Scotland’s equivalent of U.S. bankruptcy.

It’s what administrator Blair Nimmo describes as the "slightly different dynamic" of buying a company out of insolvency. The price is cheaper, a definite perk, but the big difference when purchasing a business in this manner is the chance to ditch significant, unwanted baggage such as debts, creditors, and similar liabilities. 

"We have had quite a few enquiries," Nimmo says. These have ranged from requests about redundant stock and equipment, right up to queries about taking on part or all of the operation, some even hoping to possibly take advantage after a wind-down in orders/sales, but before a complete shutdown/loss of maintenance on mill equipment, and before a loss of connection with what has been a dedicated workforce. 

This is the same workforce that eventually took on cooperative employee ownership when a corporate buyer couldn’t be found to continue operations their mill workers still felt confident they knew could sustain profitability, at least during that time. And for that time, they were right.

But the writing was on the wall. That time has expired due to unfortunate, fast-moving, unpredictable market conditions for Tullis Russell to handle on its own. It was impossible for this now smaller company to find adequate time to adapt with its limited resources, largely due to a lack of corporate-level ownership the mill’s workers had been continually seeking. 

Various industry sources and analysts have said if Russell is to be revived, change will likely have to come to the mill in the form of new machinery for the new, 21st century paper products market, one that the previous Tullis Russell failed to adapt to in time, probably as their own ability to invest dwindled during a time of "hanging on" in the increasingly difficult newsprint market, a market that largely depends on closures of other mills to temporarily prop-up demand, the same demand that is still shrinking in many regions due to electronic sources of print and news media taking favor with younger demographics. 

To say the least, many investors and business strategists believe it is a losing battle and a risky investment without innovations like electrical cogeneration or exclusive, low cost contracts for their power (which, ironically, Tullis Russell had just invested in with a next-door biomass plant through partnership with Npower). More modern and diverse equipment to make additional products, and an equal if not primary focus on transitioning to producing paper-based packaging over printing and writing paper would likely be required in the eyes of any new ownership. 

"What we don’t know yet is if that interest is just someone having a little bit of a look, or if it is serious," the administrator explained. "I would think that in this next couple of weeks we will get a feel if there is any real interest."

The article takes a realistic view of the situation, and not necessarily an overly bullish one many mill workers might hope for, pointing out there are still, as yet, no firm bids on the table, and no guarantees forthcoming. Newsprint and most other paper grades produced at the mill have been in consistent decline in North America and much of Western Europe, including the U.K. Still, the administrator and his colleagues are for the moment giving priority to enquiries about taking on all or part of the business, with requests for stock and equipment temporarily set to one side, a hopeful sign that in the not too distant future, operations may resume with a new owner. But mill supporters should not hold their breath.

In the meantime, Tullis Russell remains in what seems like a quickening day-by-day wind down, with the factory’s remaining 149 workers finishing off various orders before initiating shutdown procedures and officially leaving their positions, further placing Russell into a mothballed state. The mill could be firmly shutdown by the time a buyer could complete an acquisition and form a new business plan. Some believe this may ultimately be why there is no commitment to restart the mill, despite the cheaper cost, loss of debts, and most liabilities. 

Industry analysts highlight that a serious new buyer would likely have to upgrade the mill to include more profitable sectors of the pulp and paper related industry, such as paper-based packaging, with popularity growing in the U.K. due to strengthening consumer environmental concerns that plastic packaging is non-biodegradable and thus not part of a sustainable future for the North Atlantic region, or for that matter, planet wide eco-systems.