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Paper War Catching Fire

July 2001
FEDERAL WAY, WA—The high-octane, acrimonious hostile takeover attempt of paper giant Willamette by fellow industry heavy Weyerhaeuser appears far from over.

The battle lines were drawn June 7, when Willamette shareholders appeared to have voted in the Weyerhaeuser slate of three to its board of directors; official results weren't expected for a few weeks, as of press time.

With their slate in place, Weyerhaeuser vows to nominate another slate of directors for election at the 2002 annual meeting should Portland, OR-based Willamette refuse to negotiate, as has been Weyerhaeuser's contention. Willamette counters that the current offer on the table of $50 per share is not even "in the ballpark."

The two sides engaged in a propaganda letter writing campaign leading up to the June 7 board meeting:

* On May 9, Willamette informed Weyerhaeuser that its board of directors had unanimously rejected its amended offer of $50 per share, writing, "Put simply, we have concluded that your latest offer does not come close to accurately reflecting the significant value inherent in what we believe is the premier franchise in the forest products industry."

In outlining several points to back the rejection, Willamette called the offer's 4 percent increase from $48 as being "paltry."

A protracted battle may do harm to Willamette's value, some shareholders fear. "These guys (Willamette's board) have surprised even us," Steven Cohen, chief investment officer at Keller, DiLeo & Co. and a Willamette shareholder, told Reuters. "They haven't taken any steps to do something that is even remotely in favor of their shareholders."

* On May 21, Weyerhaeuser said it would consider upping the ante to flush out Willamette to the negotiating table. "If Willamette is prepared to negotiate a definitive merger agreement promptly, Weyerhaeuser is willing to increase its offer to above $50 a share," Steven Rogel, Weyerhaeuser chairman and CEO, said in a statement.

* Weyerhaeuser gained momentum when two of the leading proxy advisor firms, Proxy Monitor and Institutional Shareholder Services (ISS), recommended that Willamette shareholders vote for the Weyerhaeuser nominees. "One has to wonder whether the Willamette board would accept ANY offer from Weyerhaeuser, or any other suitor for that matter," Proxy Monitor said in its May 24 report.

The report also alluded to Willamette's agreement with its financial advisor, Goldman Sachs & Co. Weyerhaeuser, in a letter to Willamette shareholders dated May 25, said, "Ask yourself why Willamette is paying Goldman Sachs $30 million of your money to prevent a deal with Weyerhaeuser."
 

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