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G-P Throws Wrinkle Into Drama

February 2002
PORTLAND, OR—Just call Georgia-Pacific (G-P) "the other paper."

Federal Way, WA-based Weyerhaeuser saw its year-long courtship of Willamette Industries, based here, turn into a acquisitional triangle when Willamette announced it was pursuing negotiations to obtain Georgia-Pacific's building products unit.

Widely viewed as an act to discourage Weyerhaeuser's overtures, the acquisition of G-P's building products unit would give Willamette a product and service facelift, and preclude Weyerhaeuser from making the acquisition. Such a move, genuine or not, had the opposite effect. In fact, Weyerhaeuser upped its hostile takeover attempt of Willamette to $6.05 billion, from $50 a share to $55 a share. The total does not include the assumption of more than $1.5 billion in debt.

According to Weyerhaeuser President and CEO Steven Rogel, the $55 offer is the absolute highest offer the company will extend. The two companies finally sat down at the bargaining table in late December.

"Based on a thorough analysis of everything Willamette has provided, $55 per share represents the highest price we are prepared to pay for Willamette," Rogel wrote in a letter to Willamette's board of directors. "This is a premium offer that gives Willamette shareholders full and fair value for their investment in Willamette, including potential synergies of the proposed combination. While we are disappointed that you have not authorized Willamette's advisors to negotiate a definitive merger agreement, we are prepared to meet immediately to do so. That would permit our $55 cash offer to be received promptly by Willamette shareholders."

Answer Soon

Willamette was scheduled to make a decision on the Weyerhaeuser offer after its board reconvened last month. The company still left an open door to a possible deal with Georgia-Pacific, which may or may not be viewed as leverage.

The first per-share bid for Willamette, of $48, was tendered by Weyerhaeuser in November of 2000 and was soon raised to $50 a share. This most recent increase will likely trigger intense negotiations between the companies, but Weyerhaeuser appears to have the upper hand on a couple of fronts:

* Shareholder rebellion. Reuters has reported that hedge fund manager P. Schoenfeld Asset Management, which reportedly owns just under 300,000 Willamette shares, has threatened to lead a shareholder revolt if the company does not attempt to sell itself to the highest bidder. In a letter to Willamette, Peter Schoenfeld—hedge fund manager and CEO—promised to nominate three directors for Willamette's board at the company's next annual meeting if it does not abide by the wishes of the shareholder majority.
 

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