Given recent trends in the paper industry, analysts weren’t completely surprised that MeadWestvaco sold off its paper-making division Tuesday. But what the future might hold for the Rumford mill and its 1,100 workers is uncertain.

“It’s a situation that can be scary,” said Lloyd Irland, Winthrop-based analyst and consultant for the Irland Group. “You can never really be sure whether the new owners will come in with a chain saw or be serious long-term investors.”

The new owners are Cerberus Capital Management, a Park Avenue-based investment firm, with $14 billion in assets.

“We have acquired a number of companies; we are long-term investors,” said Richard C. Auletta, spokesman for Cerberus.

The $2.3 billion acquisition is expected to be completed in the second quarter of 2005. Until then, Auletta said he could not comment about specific plans for the paper-making operation, including what might happen in Rumford.

“The one thing I will say is that Cerberus is committed to the business,” he said. “It wouldn’t have acquired (the division) without feeling strongly about its potential.”

Auletta said Cerberus’ dedication to maintaining the paper-making business is reflected in its decision to keep the current MeadWestvaco management team. President Peter Vogel Jr. will stay on as chief executive officer of the new company. The approximately 6,300 MeadWestvaco employees are expected to keep their jobs.

Irland said the paper industry is increasingly becoming a target for investors. After a powerful contraction over the last several years, mills are now more productive and the market is improving. That means paper mills can be an investment bargain.

“Investors look at a cyclical industry and buy after comparative cutbacks and then hope for a price rebound,” said Irland. “That could be part of the strategy here.”

Mark Wilde, managing director for Deutsche Bank in New York City, analyzes the forest products industry. He said the sale came as no surprise since the coated paper division of MeadWestvaco had been losing money for years and that the company had been under mounting pressure from shareholders.

“They were saying, Look, this division is a bleeder and we’re in to too many businesses anyway,'” said Wilde. “So get out, and get more focused.”

He said he suspected the real motivation behind Cerberus’ acquisition is the 900,000 acres of forest land promised in the deal.

“Timberland is worth much more on a financial multiple basis than a paper company,” said Wilde. As an example, a paper company might command a price seven or eight times its cash flow; for a timberland company, it’s 15 to 20 times the cash flow.

According to MeadWestvaco’s November 2004 quarterly report, sales in the paper division increased to $616 million in the third quarter of 2004 compared to sales of $571 million in the third quarter of 2003. The improvement was driven by record coated paper shipments, reflecting increased demand and gain in market share. Of the 2.1 million tons of specialty-coated papers made by MeadWestvaco, about 500,000 tons are produced in Rumford.

Wilde said he wasn’t very optimistic about the Rumford mill’s long-term prospects. Increasing competition from oversees manufacturers will continue to squeeze older mills in Maine and elsewhere. He said a Finnish paper-making company is building a new machine in Minnesota that will equal what four of Rumford’s machines produce.

“Unless companies are willing to invest capital and modernize and then get a return on that investment, I see things getting bleaker and bleaker in Maine,” said Wilde.

Irland was a little more upbeat. He said many paper companies grew to become gigantic, bureaucratic dinosaurs that were so hidebound they couldn’t respond quickly to changing markets. A more compact company has a better chance of staying competitive.

“A smaller, better managed company that can be more flexible is not a bad thing,” said Irland.