Weyerhaeuser bids for rival Willamette
Seattle Times business reporter
Steve Rogel had been Weyerhaeuser's chief executive for all of nine months when he made his first buyout overture to Willamette Industries, the Portland-based forest-products company he'd left in December 1997 to run Weyerhaeuser.
But Willamette hasn't been interested. It rejected a stock-for-stock takeover bid in August 1998 and a cash-and-stock offer two months ago.
The last straw, Rogel said, came Thursday, when Willamette's board met and adjourned without even discussing Weyerhaeuser's latest proposal. A note dated Sunday from Rogel to Willamette Chairman William Swindells said he was "astounded" at the board's action, or lack thereof.
"You leave us no alternative but to consider your response a rejection," the note continued. "We are forced to assume that we must consider other alternatives to consummate a transaction."
That, Rogel said, is why Weyerhaeuser made its $7 billion cash-and-debt offer public yesterday, and broadly hinted it would pursue a hostile takeover if Willamette turned down the proposal.
"We felt our shareholders and theirs needed to know where the matter stood," Rogel said in an interview. "What we're trying to do is get their board to sit down and work out a definitive deal with us."
Weyerhaeuser's proposed deal includes $48 in cash for each outstanding Willamette Industries share, plus assumption of $1.7 billion in debt.
The offer represented a 38.1 percent premium over Willamette's closing share price Friday. The shares soared $11.19 yesterday to close at $45.94.
Weyerhaeuser's shares closed the day at $41.69, down $1.19.
Officially at least, Willamette Industries seemed in no hurry to respond to Weyerhaeuser's offer, though it was a hot topic of conversation among employees at the company's downtown Portland headquarters.
Cathy Dunn, Willamette's spokeswoman, said the board's agenda last week was full and members believed they needed more time to analyze Weyerhaeuser's offer.
"We were surprised to come in this morning and find that they'd made their offer public," Dunn said.
The directors will meet to consider their response, she added, but don't have a date yet.
Buying Willamette would strengthen Weyerhaeuser's paper-products businesses, particularly its containerboard and uncoated freesheet (office paper) lines.
A combined company, Weyerhaeuser officials said, would rank third among the world's containerboard producers, second among uncoated freesheet producers, and third among North American structured panel producers.
It also would become the second-largest timberland owner in North America, behind Purchase, N.Y.-based International Paper. Together, the two companies would own, lease or have cutting rights to 41.6 million acres of timberlands in the northwestern and southern United States and Canada, as well as 493,000 acres in Australia, New Zealand and Uruguay.
"We're creating truly a new North American and global leader in forest and paper products," Rogel said.
Terry Schumacher, an analyst who follows Weyerhaeuser for First Security Van Kasper in Portland, said there'd been speculation about a deal with Willamette almost from the day Rogel left, nearly three years ago.
"Steven Rogel, from the day he got to Weyerhaeuser, has openly communicated that the product areas he wants to grow are fine paper, timberlands and wood products, and containerboard and packaging," Schumacher said. "That happens to be just about a perfect product profile for Willamette Industries."
Schumacher, who had valued Willamette's shares at $52.75 in a recent report, said $48 was a fair price but added that Weyerhaeuser is in a position to pay more if it needs to.
However, he said, Weyerhaeuser's offer might spark interest from other forest-products companies. He cited two Finnish companies, Stora Enso Oyj and UPM-Kymmene Oyj, as possible bidders.
International Paper might be interested, Schumacher said, but it also might be preoccupied with its recent acquisition of Champion International. Smurfit-Stone Container is another possibility, though he called it "a longer shot."
Weyerhaeuser is no stranger to big acquisitions. It paid $2.3 billion a year ago for MacMillan Bloedel, a Canadian wood-products company, and $720 million for TJ International earlier this year.
Pat Becker, a Portland money manager who represents Oregon's Clark family, said they'll wait to hear from Willamette's board before commenting on the offer. The family owns 8.1 million shares, or 7.28 percent, of the company.
Weyerhaeuser Willamete Industries <table BORDER COLS=3 WIDTH="75%" HEIGHT="75%" ></table> THE SEATTLE TIMES
|Timberland#||5.8 million acres||1.7 million acres|
|1999 sales||$12.3 billion||$4.08 billion|
|1999 profits||$527 million||$260.5 million|
|# For Weyerhauser, owned and leased timberland; for Williamette, owned and managed timberland|
|SOURCE: Weyerhaueser, Williamette Industries|
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