The Paper Prince

On the Hiwassee River in Calhoun, Tenn. last week, the South passed an important milestone in its fast industrial growth. The milestone: dedication of a $60 million newsprint plant that will provide 750 jobs and an important outlet for one of Dixie's most abundant natural resources--southern pine. Outside the long, low buildings, some 450 visiting publishers and their wives inspected a giant man-made pond, as big as the Yale Bowl and capable of storing 30,000 cords of wood under water to guard against decay. Inside, they looked over two huge papermaking machines producing at the rate of 130,000 tons of newsprint a year.

For the U.S. newspaper industry, which now imports more than 80% of its newsprint, the new plant assures another big source of domestic supply. The new plant also represents the biggest single British investment in the U.S. since World War II and an effective variation on the concept of "trade, not aid." For the new mill is controlled by Britain's Bowater Paper Corp., Ltd., the biggest newsprint maker in the world (1,000,000 tons a year).

Dollars & Pounds. On hand to greet the guests last week was a beet-faced, ramrod-straight 58-year-old named Sir Eric Bowater. Having already built a small family business into a colossus, Sir Eric decided seven years ago that he could better serve his many U.S. customers (biggest: Scripps-Howard) with a U.S. mill. He decided on Calhoun because it has plenty of water, good transportation and access to vast supplies of southern pine, which has a growth cycle of only 25 years, v. 75 years for northern spruce.

In 1951, when Britain's postwar dollar shortage was still tight, Bowater persuaded the Labor Government to let him convert $15 million worth of pounds into dollars to provide the equity capital for his new plant. He argued that within 15 years all the dollars would be paid back in the form of dividends to the British parent. Then, from a group of U.S. insurance companies and banks (led by Morgan Stanley and J. P. Morgan & Co.), Bowater was able to borrow $45 million to provide the rest of the financing. They were willing to lend the money only because of another Bowater feat. He had signed a contract with more than 100 Southern publishers, under which they agreed to buy the mill's entire newsprint output for the next 15 years. With that accomplished, it was comparatively easy for Bowater to get a "certificate of necessity" (required during the Korean war) from the Government, though U.S. papermakers vigorously opposed his scheme.

Bags & Spoons. Eric Vansittart Bowater, says one of his friends, is a "self-made man who was born with a silver spoon in his mouth." Though he comes from a titled family, Sir Eric earned his knighthood for World War II service in the Air Ministry. The family has been in the paper business since 1881, but it was not until Eric, a wounded veteran, joined the firm in 1921 that the company began to expand fast. Sir Eric decided that the firm, then only a trading company with assets of $1,500.000, ought to get into manufacturing. Unable to persuade some uncles in the firm to agree, he got British Press Lord Rothermere (Daily Mail) to help buy his uncles out (Rothermere later sold out).

Bowater built a newsprint mill on the Thames near London, and another near Liverpool, to supply several mass-circulation London dailies. He acquired timberlands and mills in Scandinavia, and as war approached turned to Newfoundland, where he bought International Paper's big plant at Corner Brook, and 7,000,000 acres of timber. At war's end, Sir Eric started diversifying into paper bags, paperboard and other products, which now account for almost 20% of his production. The $250 million Bowater empire now employs 16,000 in some 40 companies spread through eight nations of the free world.

While hedging his bets with diversification, Sir Eric is still bullish on newsprint. In this generation, says he, "three great areas will open up--South America, India and Southeast Asia and China." In Britain itself, where newsprint is still rationed, Sir Eric thinks that demand would soar from 800,000 tons to 2,500,000 tons a year if the papers were to expand to their prewar size. And he is so enthusiastic about U.S. prospects that last week he announced a third paper machine will be added to the Calhoun plant, making it the biggest newsprint mill in the South.

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