Area businessmen buy sawmill.

Byline: Diane Dietz The Register-Guard

In a deal that illustrates a major change in the structure of the nation's wood products industry, four low-profile Lane County businessmen have bought the century-old Boise Cascade Corp. sawmill in Yakima, Wash.

Investors Norman and Melvin McDougal and Greg and Jeff Demers paid $3.25 million for the plant in January, according to public records.

The sale is an example of how the nation's biggest wood products companies - Boise, Georgia-Pacific, Louisiana-Pacific and, to some extent, Weyerhaeuser Co. - are half-stepping away from their beginnings in the nation's sawmills.

The Yakima mill was founded 102 years ago as Cascade Lumber and it gave the venerable Boise Cascade half its name. Still, Boise decided last month to shed the plant. And more sawmill sales may be in the works as the company completes a "strategic evaluation," spokesman Ralph Poore said. The company will include its eight large wood products plants in Oregon in the discussion of possible sales, Poore said.

"When we have specific decisions to announce, we will make them public," Poore added.

This may be a smart time for Boise to get out.

Upside economics may entice buyers: On the lumber demand side, the strongest U.S. housing market since the late 1970s is jacking up lumber prices. On the lumber supply side, the weak dollar has staunched the price-depressing flow of Canadian lumber into the United States.

The average composite price for framing lumber has jumped 19 percent since December, to $389 per thousand board feet, according to Eugene-based Random Lengths. The composite price for plywood and other panels is up 107 percent from a year ago.

The Yakima mill can produce 225 million square feet of plywood (on a three-eighths-inch basis) a year, and 80 million board feet of lumber.

The price hikes are good news for the Demerses and McDougals, said Paul Ehringer, a Eugene-based wood products analyst. "The markets are hot. In the next six months, (the buyers) may make enough to pay for it all."

Boise Cascade, meanwhile, is "rebranding" and refocusing. Two years ago, it dropped the "Cascade" from its brand name - although the company kept "Cascade" in its legal name - and now likes to be referred to as just plain Boise. The company notes that distribution work now accounts for two-thirds of its sales.

In December, the company took a major turn, buying the 1,000-store OfficeMax office supply company for $1.2 billion in cash and stock.

"Their intention is to become a hanky-and-office-products company," said Doug McDonald, owner of Eugene-based Timber Data Co.

McDonald suspects the transformation was spurred in part by environmental groups that were causing Boise grief - labeling the firm the "most destructive logging company" on Earth. In 1999, the elusive Earth Liberation Front singed the company by burning down its Monmouth office, causing $1 million in damage.

But the Rainforest Action Network's three-year national public relations attack may have been even more expensive to Boise. Publicly owned companies like Boise are vulnerable to adverse PR, McDonald said.

San Francisco-based Rainforest Action targeted lumber buyers, including Boise's top customers. It got pledges from 400 companies not to do business with lumber producers that cut old-growth trees. In 1999, giant Home Depot signed on.

The Rainforest group traveled the country with a 120-foot helium-filled dinosaur, which it linked to Boise's "stone-age" practice of cutting old-growth timber. The group's activists crashed Boise's shareholder meeting in April 2003.

All the bad publicity hurt because Boise sold heavily into the retail home improvement market, McDonald said. "If you get those accounts, you have 5,000 retail sites you want to sell your lumber to. You want to keep that," he said.

By September 2003, Boise cried uncle. It announced it would stop cutting timber from old growth forests in 2004 and stop buying wood from endangered forests in places such as Chile, Indonesia and Canada.

And then the company talked of shedding sawmills.

"They don't want to be involved in operating sawmills," Ehringer said. "It's a volatile business and most of them can't stand volatility."

The Yakima plant may have been a good buy for the McDougals and the Demerses - and the Demerses' Frontier Resources LLC, which is calling the shots at the plant. Neither pair of brothers returned calls from The Register-Guard.

Low-profile Frontier - which owns a sawmill at Pilot Rock in Eastern Oregon - will be better able to weather PR attacks, McDonald said. Frontier, on its Web site, calls itself a "streamlined, independent company."

"Frontier is not publicly traded," McDonald said. "It doesn't have shareholders meetings the company has to worry about - and it's much more limited in geographical scope. As a privately owned company, they'd be more effective in telling the Rainforest Action Network to take a hike," he said.

What smaller buyers such as Frontier intend for Boise Cascade's divested sawmills is a subject of angst in small Western Washington towns.

The Yakima mill provides 360 good-paying union and management jobs.

"It's a big, important operation for that community. Let's hope (the buyers) want the property for the mill," McDonald said.

But Ehringer could offer slim comfort for the people of Yakima. He said he'd give no better than even money that the mill would still be operating in 2006.

The Demerses and the McDougals started in the woods, but their major activities in recent years have been weighted toward developing and investing. The Demerses do multistate timberland deals, and the McDougals are developing resort land in the upper McKenzie River area and Creswell.

The mill's purchase price was one-tenth of its latest assessed value, Yakima County records show.

"The people involved in this are speculators, and they know a deal when they see it," Ehringer said. "It was a dirt-cheap price."

The Yakima mill sits on 195 acres on the east side of downtown Yakima. It's in the city's enterprise zone, so the new owners might qualify for federal tax breaks on wages, equipment and capital gains.

"Figure what that's worth. Forget the mill," Ehringer said.

BOISE'S HOLDINGS

Boise Cascade Corp. is evaluating whether to put up for sale its eight manufacturing plants in Oregon. The plants are:

Medford: Plywood/veneer

White City: Lumber, plywood/veneer

Independence: Plywood/veneer

Salem: Corrugated containers, paper converting

Willamina: Plywood/veneer

St. Helens: Plywood/veneer, paper manufacturing

La Grande: Lumber, particleboard 

Elgin: Lumber, plywood/veneer