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Weyerhaeuser talks takeover
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November 13, 2000: 5:21 p.m. ET
Forest products titan floats $5.2B takeover bid for Willamette Industries
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NEW YORK (CNNfn) - Timber company Weyerhaeuser Co. disclosed plans Monday to explore "other alternatives" to acquire paper products maker Willamette Industries after the company's board failed to act on an unsolicited $5.24 billion takeover bid submitted by Weyerhaeuser last week.
In a short note sent to Willamette's board Monday, Weyerhaeuser Chairman and Chief Executive Officer Steven Rogel said he was "disappointed" by the company's lack of response to the all-cash buyout offer submitted by his firm on Nov. 6.
"You leave us no alternative but to consider your response a rejection," Rogel said his letter to Willamette Chairman William Swindells Monday. "We are forced to assume that we must consider other alternatives to consummate a transaction."
The Nov. 6 bid submitted by Weyerhaeuser proposed acquiring the Portland, Ore.-based company for $48 per share in cash, a more than 38 percent premium above Willamette's closing price of $34.75 Friday. Weyerhaeuser would also assume roughly $1.7 billion in Willamette debt, bringing the transaction's total enterprise value to nearly $7 billion.
 Acquiring Willamette (WLL: Research, Estimates) would rank Weyerhauser as the world's third-largest paper and forestry products producer behind IP and Georgia-Pacific with annual revenues in excess of $16 billion.
If completed, such a deal would continue an active year of consolidation in the paper industry, sparked by International Paper's $7.3 billion acquisition of rival Champion International Corp. in May, creating the world's largest paper and forestry products company.
In his original proposal to Willamette, Rogel, who served as Willamette's CEO until departing for Weyerhaeuser in 1997, noted that after two years of toying with the idea of merging, the timing was right to create a leading premier forest and paper products company.
"Our industry's landscape has experienced dramatic change as merger activity has sharply increased among the largest companies," he said. "The combined company will have excellent market breadth and depth in fine papers, containerboard and wood products. Equally important, the proposed combination will result in a more balanced business mix than either company currently has on its own."
However, in his letter dated Monday, Rogel said he was "astounded" that Willamette's board met last Thursday, but did not act on the proposal.
Willamette bides time
Willamette released a statement Monday afternoon saying it informed Weyerhaeuser last Friday that it was reviewing the proposal and would "respond in due course."
"It is unfortunate that Weyerhaeuser chose to make its proposal public at this time," the company said.
Sources close to the situation said Willamette's board had discussed the offer at length last Friday, but simply didn't have enough time to make a final decision. The board is hoping to meet again on the proposal later this week, sources said.
Weyerhaeuser said its preliminary review of a possible merger revealed the combined company would save about $300 million annually while adding to Weyerhaeuser's cash flow, earnings per share and shareholder value in the first year after closing.
The 100-year-old Tacoma, Wash.-based Weyerhaeuser is already one of the world's largest integrated forest products companies. Boasting sale of $12.3 billion last year, the company manages nearly 6 million timberland acres in the continental United States and another 33 million in Canada.
Despite the cyclical nature of the industry, Willamette has stood out as one of the more solid financial performers in recent quarters, leading at least one analyst, Mark Wilde of Deutsche Banc Alex Brown, to believe the company could garner $50 to $55 per share.
Morgan Stanley is acting as Weyerhaeuser's financial adviser on the deal while Willamette has hired Goldman Sachs to serve as its adviser.
Word of the offer sent Weyerhaeuser (WY: Research, Estimates) down $1.19 to $41.69 Monday on the New York Stock Exchange trading while shares of Willamette soared, climbing more than 32 percent, or $11.19, to close at $35.91.
-- Reuters contributed to this story 
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