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The big surprise in the announcement of Repap's sale to Finland's UPM-Kymmene isn't the low sale price or even the fact someone is willing to take on the debt-laden forestry company. It's that Repap is still alive to be sold.

It's hard to think of another Canadian company with a more consistently troubled financial history, one filled with endless scrapes and close calls and near-insolvencies.

For 25 turbulent years, Repap has somehow clung to life, expanding too quickly in the 1980s and then ditching assets in the late 1990s to pay interest on an enormous debt. It's now just a tiny version of its former self, better known in recent years for its ugly internal board battle than for its forestry operations.

There are lots of memorable moments in Repap's long history -- staving off creditors in 1978; the Niagara Falls mill going bankrupt in 1982; Repap going public in 1986 -- but the beginning of the end can probably be traced back to 1994, when company founder George Petty gave up his controlling interest to secure another equity offering at yet another time when Repap was unable to cover interest payments on its debt.

At first, it seemed Repap would finally be well financed with a brighter future. In its 20-year history, Repap had expanded from a handful of small, highly leveraged mills into a forestry leader with op- erations in the United States, British Columbia, Manitoba and New Brunswick. In 1995, Repap had sales of $1.6-billion and an operating profit of $349-million.

But pulp prices quickly dropped like a rock and Repap had an enormous $2.5-billion debt, which quickly became unsupportable as revenue declined sharply.

In December, 1996, Repap appeared to find salvation, announcing that Avenor would buy the company for $3.3-billion, an offer that was later cut to $2.75-billion. The deal was ill-fated from the beginning, raising the wrath of shareholders who wanted no part of Repap's enormous debt. The Caisse de dépôt et placement du Québec led a coup, and Avenor shareholders voted three to one against the deal at a cliffhanger meeting.

Repap's shares, which had been at $5.50 when the deal was announced, fell to $1.55 and kept sinking throughout the spring of 1997. The company was in enormous financial straits, and ended up walking away from its B.C. operations, turning them over to lenders.

Despite some emergency financing from TD Bank and other lenders, Repap had no choice but to shed assets. By July, 1997, Repap had sold its U.S. operations to Consolidated Papers for $277-million (U.S.), plus $433-million of assumed debt. Then Repap sold its Manitoba operations, and later that year shed experimental Alcell Technologies, leaving it owning just its mill complex in New Brunswick.

The sales alone were not enough. In August that year, hedge funds Silverton International and Paloma Partners acquired a controlling stake after Repap converted debentures into shares. The new shareholders' first act was to oust Mr. Petty, replacing him with Repap president Stephen Larson. By then, Mr. Petty owned just 3.8 per cent of his company, and could do nothing to protest.

The new management quickly closed Repap's Montreal headquarters and moved operations down to Stamford, Conn., chopping almost all head office jobs.

The public story might have ended there, but events in 1999 pushed Repap back into the news. A group of dissident shareholders, led by TD Asset Management, launched a battle to oppose a compensation plan for chairman Steven Berg. Mr. Berg, who had just been appointed months earlier, had a deal that included a $420,000 (U.S.) salary, a signing bonus and a bonus based on the total value of Repap's shares that was worth about $3-million last summer.

In August last year, after a summer of wrangling, Mr. Berg was voted off Repap's board by the shareholder group. Earlier in the summer, five other directors resigned over the controversy. Lawsuits are still flying from all sides.

Although dramatic, the board dispute has been a sideline to Repap's continuing financial struggles, and the decision to sell to UPM must surprise no one.

In the end, Repap simply had the same problem too often. It took on too much debt, and failed to pare it down during good times in the industry cycle. It grew too much, then was forced to become too small to be viable in a world of consolidating giants.

It is sad to think that Repap is worth just $160-million today. But it's a better end than many expected three years ago, when the bankruptcy watch was going strong. Repap can feel a strange sort of pride in clinging to life this long. Janet McFarland's e-mail address is jmcfarland@globeandmail.ca

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REPAP ENTERPRISES INC.

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