Crown Vantage to Sell New Hampshire Mills to American Tissue Corp.

OAKLAND, Calif.--(BUSINESS WIRE)--March 25, 1999--

Strategic Marketing and Outsourcing Alliance Another Step to

Strengthen Market Position in Value-Added Product Lines

Crown Vantage Inc. (Nasdaq:CVAN) and American Tissue Corporation (ATC) announced today that the two companies have signed an asset purchase agreement for the acquisition by an affiliate of ATC of Crown Vantage's pulp and paper mills located in Berlin and Gorham, N.H., for approximately $45 million. As a major element of this strategic alliance, Crown Vantage will outsource production of its papers manufactured at Berlin-Gorham from ATC.

"We're especially pleased to retain market control of the branded printing papers, which are integral to our strategic printing and publishing papers offering made throughout the Crown Vantage system. Our strategy has been to focus more closely on developing our high value brands such as text, cover and writing papers and to transition from a manufacturing- to a marketing-driven organization," said Crown Vantage President and Chief Executive Officer Robert A. Olah." This divestiture and strategic outsourcing alliance will allow us to focus our capital and human resources on value-added printing, publishing and specialty packaging papers, areas where we expect our strongest growth."

According to Kurt Goldschmidt, senior vice president of American Tissue, the Berlin and Gorham operation will be known as Pulp and Paper of America. "We expect the annual sales of our company to double with this acquisition," he said. American Tissue will continue to produce specialty and printing and publishing papers there and will market jumbo rolls of absorbent products to converters. The pulp mill will continue to supply the Gorham paper machines and market pulp customers as well as other ATC mills.

"This arrangement enables both Crown Vantage and American Tissue to do what they do best," said Olah.

The transaction is subject to Crown Vantage lender consents and successful completion of its financing by ATC and is expected to be completed during the second quarter of 1999. Crown Vantage plans to use net proceeds from the sale to pay down debt.

The sale is part of Crown Vantage's overall strategic plan to restore its financial health by reducing debt and improving cash flow and liquidity. Over the past three years, the company has built on its strengths and enhanced its market presence by aligning its people, manufacturing capabilities and value-added product offerings in higher value and specialty papers.

The Strategic Alliance:

As part of the alliance announced today, American Tissue will continue to manufacture Crown Vantage printing and publishing paper brands at Berlin-Gorham for a period of at least three years.

"As we seek to maximize the value of our assets for shareholders, this agreement provides the best possible outcome for the company as well as its valued mill employees, the communities of Berlin and Gorham and the state of New Hampshire," said Olah. "American Tissue is committed to strategic development of these facilities, building on the current resources of the mills."

The operations being sold include the pulp mill at Berlin, which produces 300,000 tons of hardwood and softwood pulp annually, and the five paper machines at Gorham. Four of the paper machines manufacture about 142,000 tons a year of printing and publishing papers, while the fifth machine makes 40,000 tons of commercial toweling annually.

It is the intention of American Tissue to employ most of the mills' 850 employees. Crown Vantage last year restructured its sales and marketing organizations and does not anticipate significant change as a result of the sale.

"Crown Vantage has always had a market advantage with its multi-mill system making it possible for paper brands to be made at more than one facility," Olah said. Graphika!, the company's popular text and cover paper used in annual reports and other corporate communications, is made to the same quality standards at mills in Adams, Mass., and Ypsilanti, Mich., as it is at Berlin-Gorham, Olah noted.

"Our marketing and outsourcing agreement with ATC now opens the possibility for us to produce and commercialize our brands with even greater flexibility, enhancing our ability to match capacity to the changing needs of the marketplace," Olah said.

Crown Vantage Strategy:

To support its corporate strategy, Crown Vantage reduced operating costs by 12 percent from fourth quarter 1997 to fourth quarter 1998 and reduced its debt by about $57 million since its incorporation in 1995. Other steps taken by the company in the past few years to improve its financial structure and market focus include:

-- Streamlining of management and sales and marketing organizations to intensify focus on printing and publishing papers and specialty papers, September 1998.

-- Establishment of just-in-time, state-of-the-art distribution centers outsourced in Los Angeles, Chicago and New Jersey to enable overnight delivery to most customers in the U.S., 1998.

-- Reclaiming $33 million in pay-in-kind notes from Fort James, reducing debt load and improving financial structure, fourth quarter 1998.

-- A major restructuring that reduced the work force by 7 percent, 1998.

-- Sale of timberlands in New England and the Southeast, November 1997.

-- Closure of Newark, Del. Mill, December 1997.

Strategy Focuses on Key Segments to Build Market Advantage:

Crown Vantage has instituted an ongoing strategy to increase sales and target market share by focusing its business in value-added areas. These include its high quality uncoated printing paper brands, such as Graphika!(R) and the Curtis(R) Collection text, cover and writing papers; Dominion(R), Zealand(R) and Squire(R) opaque printing papers; Legend(R) and Limited Edition(R) book publishing papers; Reclaim(R) recycled papers; coated groundwood publishing papers used in magazines and catalogs; and customized specialty papers that are developed and produced to meet specific customer product needs, for example, coated label papers, disposable medical garments, paper plates, sandwich wrappings, coffee filters and others.

About American Tissue Corporation:

American Tissue Corporation is a subsidiary of American Tissue Holdings, Inc. and is headquartered in Hauppauge, N.Y. ATC is the sixth largest producer of tissue products in the United States with paper mills and converting facilities in New Hampshire, New York, Wisconsin, Oregon, California, Tennessee and Mexico. The company has grown through capital investments and actively pursuing acquisitions to strengthen its competitive posture. The company is a leading manufacturer and marketer of jumbo rolls, away-from-home and private label retail tissue products and also produces bags, sacks, corrugating medium, core stock, table covers, straws, stirrers and pizza boxes. More information about American Tissue is available on the Internet at www.americantissue.com.

About Crown Vantage:

Crown Vantage, headquartered in Oakland, Calif., makes and markets specialized papers for printing, publishing, packaging and converting applications at its 10 pulp and paper mills in the United States and Scotland. It had sales in 1998 of $851 million. More information about Crown Vantage is available on the Internet at www.crownvantage.com.

Forward Looking Statements Per the Requirement of the Private Securities Litigation Reform Act of 1995:

This news release contains certain forward looking statements concerning Crown Vantage's intent to sell its Berlin and Gorham, N.H., facilities to American Tissue Corp. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those stated or inferred by these statements. These risks and uncertainties could include, but are not limited to, transaction delays, failure to close the asset purchase agreement, inability of American Tissue to obtain financing, failure to execute the value-added strategy, inability to reduce debt or improve cash flows and liquidity to desired levels, and other factors, including business conditions and the general economy, both global and domestic, competitive factors, maintaining good labor relations and maintaining good customer relations.