Fortress Paper has sold off its cash-rich wallpaper division to finance its movement into cellulose fabrics. What is the always adventurous CEO Chad Wasilenkoff up to now?

Fortress Paper, which began as a specialty maker of banknotes and security papers, has put in the final piece of its business model innovation by selling off its paper cash cow.

The North Vancouver company announced this week that it has a deal to sell its Dresden, Germany, wallpaper base mill to Germany’s Glatfelterr Gernsback for CDN $213 million. The mill was one of Fortress’s biggest money makers.

So why would Chad Wasilenkoff, the ex-Howe Street analyst and player and now CEO of Fortress, undertake what appears to be a dumb move like selling off a top cash generator?

I’ve spoken to Wasilenkoff, known as a Howe-street maverick, before, and he’s anything but dumb. Wasilenkoff is a superb stock and market analyst and player, and he knows when markets are on the rise and when they’re on the skids.

I’m betting that he believes paper is in the latter category -- old-economy products that are facing a saturated market in a world where paper is being replaced by bytes. Instead, cellulose, the core part of wood pulp, is increasingly being used to produce semi-artificial fabrics like viscose and rayon, which often replace cotton.

In 2010, when worldwide cotton prices spiked to extreme highs, Wasilenkoff engineered a deal to buy a shuttered pulp mill in Quebec to produce cellulose and thus rayon. The Quebec government, unions, and the federal government kicked in to help close the deal, almost paying for it completely.

Since then Wasilenkoff has been upgrading the mill to produce varieties of dissolving pulp and thus broaden the market for its fabrics base material.

The deal to sell off the wallpaper division supplies funds for continuation of the dissolving pulp strategy.

Fortress will keep its banknotes division, where it all started, but has beefed it up with an optically variable thin film security material operation. The Canadian-designed film is used to create security “windows” in bank notes.