MILLINOCKET — A California company is terminating efforts to purchase paper mills in Millinocket and East Millinocket, according to Gov. Paul LePage, who said today he was disappointed but promised to keep working toward economic recovery in the area.

The Katahdin Paper Co. mills in the two northern Maine towns are owned by Brookfield Assets Management investment group in Toronto. Meriturn Partners LLC had signed a letter of intent in March to buy the mills by April 29 if it could negotiate new labor contracts with the mill workers, receive $48 million in property tax breaks over 10 years and install a biomass boiler in the Millinocket mill to make it more energy-efficient.

LePage said he had been directly involved in negotiations for a purchase as recently as Wednesday, seeking a 30-day extension for deliberations from Brookfield President Richard Legault.

Meriturn partner Lee Hansen confirmed by e-mail Friday that negotiations had broken off, but offered no further comment.

In addition to state officials, Maine’s congressional delegation, the two towns and mill workers sought to find a way to keep the East Millinocket mill operating and restarting the Millinocket mill. The Millinocket mill’s been shut down since 2008.

“From the onset, addressing the complex conditions set forth in the term sheet was a significant undertaking in the allotted time,” LePage said in a statement, which also said he’s disappointed Meriturn is no longer considering acquisition of the mills. Meriturn invests in troubled, middle-market companies.

“This is tough news for a region with a proud history in the paper business, but we will continue to work toward economic sustainability within the region,” the governor said.

U.S. Rep. Michael Michaud, D-Maine, and a former Millinocket mill worker, said he too was disappointed “but it’s nothing compared to what this development means to the families and business that rely on the mill’s operation.”

Michaud expressed hope that options may open up and promised to work with all levels of government “to explore all of them.”

A message left with Millinocket Town Manager Eugene Conlogue was not immediately returned Friday.

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