Business Management - M&A

BY CAROLINE MILLER Two years ago, it seemed as if everyone in the paper industry was switching dance partners. Among the major acquisitions was International Paper's purchase of Champion—a deal worth nearly $7.3 billion, excluding net debt. Then came the almost soap-opera-like saga, the Weyerhaeuser hostile takeover of Willamette Industries that dragged on for 14 months and finally ended with an agreement that called for $6.1 billion in cash, or $55.50 per share, including the assumption of $1.7 billion of Willamette debt. At $19 billion in combined sales, the deal created one of the larger companies in the paper industry. And of recent

APPLETON, WI—A new buyout method has placed ownership of a paper company in the hands of its employees. Workers of Appleton Papers have purchased all the company's stock from its European parent, Arjo Wiggins Appleton, in a deal valued at $810 million. As part of the deal, management and non-management employees voted to transfer $107 million from their 401(a) and 401(k) plans through an Employee Stock Ownership Plan (ESOP) into Paperweight, the acquisition vehicle used by the employees to acquire the company. Paperweight then acquired Appleton, and Houlihan Lokey Howard & Zukin of Washington—Paperweight's financial advisor—arranged financing in excess of $700 million through bank debt,

PORTLAND, OR—The art of letter writing is far from dead. Paper manufacturing giants Willamette and Weyerhaeuser are prime examples. In the most recent round of sweet nothings exchanged between the would-be merger companies, Willamette Industries Chairman William Swindells and CEO Duane McDougall sent a letter in October to Steven R. Rogel, chairman, president and CEO of Federal Way, WA-based Weyerhaeuser Co., inviting his company to submit a written offer in the high $50s to spur merger talks. "In view of our desire to put an end to the unproductive and costly stalemate for both our companies and shareholders, we write to offer you a

DAYTON, OH—Fox River Paper announced it will acquire Gilbert Paper, located in Menasha, WI, along with selected assets from Mead Corp. The transaction was scheduled to be completed by November 30. The deal allows Fox River Paper to produce and sell all of the Gilbert Paper products as part of a separate branding strategy. Mead will have a 20 percent interest in the combined company. The partnership reportedly enables Fox River to become the leading supplier of premium text, cover and writing papers for the U.S. marketplace. "This is an acquisition that makes sense for Fox River Paper," says Robert C. Buchanan, the company's chairman. "Gilbert Paper's

STAMFORD, CT—The long-awaited paper merger has finally become a reality. Only the participants are a bit surprising. No, Weyerhaeuser did not acquire Willamette. That should take a while. And it wasn't International Paper and Stora Enso (see Paper Mill Watch), which for now is only a rumor. How about Mead Corp. and Westvaco Corp.? On August 29 the companies jointly announced a $3 billion merger, with a combined annual revenues total of $8 billion. The newly created company will be called MeadWestvaco Corp. and will be headquartered here. The move essentially launches MeadWestvaco from mid-sized player into worldwide competition with IP and Georgia-Pacific.

STAMFORD, CT—While a report in an August edition of the Swedish business daily Dagens Industri indicated that International Paper and Stora Enso were in merger talks that would create the largest worldwide paper concern at $40 billion, it seemed unlikely to happen any time soon. Citing unnamed sources, Dagens Industri reported that talks have been ongoing for the past year. Both IP, based here, and Stora Enso, with headquarters in Helsinki, Finland, and Stockholm, Sweden, refused to comment on the report, calling it a market rumor. A merger between the two paper giants is an attractive concept. IP is the worldwide leader in terms of sales

NEW YORK—As the paper turf struggle between Weyerhaeuser and Willamette continues to heat up, one thing is becoming increasingly clear—it's a personal issue. In the end, however, the almighty dollar is expected to prevail. For the second time this year, Federal Way, WA-based Weyerhaeuser has extended its $5.4 billion hostile bid for fellow paper giant Willamette, of Portland, OR. Weyerhaeuser made the announcement in early February, opening the window until March 30. During the announcement, Weyerhaeuser representatives noted that 51 percent of Willamette's shares had been tendered at $48 per share. At the initial January 5 deadline, the company said that 48 percent of Willamette's shares

PORTLAND—Two weeks after its board of directors rejected a $5.4 billion bid to sell all its 112.5 million shares to rival paper and wood products manufacturer Weyerhaeuser, Willamette Industries faced a hostile takeover attempt. Weyerhaeuser Chairman Steven Rogel presented Willamette shareholders an unsolicited offer of $48 per share. Willamette shareholders had until January 4 to accept the offer. "(The offer) provides substantial value to Willamette shareholders at a premium well beyond what Willamette could achieve alone, now or later," Rogel told The Associated Press. Willamette is expected to urge stockholders not to accept the offer, which also includes Weyerhaeuser assuming roughly $1.7 billion in

NEW YORK—It took two years for consolidation to transform the commercial printing sector, it has taken two months of consolidation to transform the printing equipment supplier sector, and in a remarkably swift series of moves, it has taken scarcely two weeks for consolidation to transform the paper market. In mid-February, the low share prices of paper companies, as well as the usual quest to expand markets and raw material sources, drove a series of mergers and acquisitions in the paper and forest products industry—moves that will have a broad impact on commercial printers, for whom paper products are a primary cost center. Among the recent moves:

Foreign paper and board producers gobble up U.S. industry giants as the market continues to tighten for commercial printers. BY ERIK CAGLE Typically, activity in the paper industry is about as gripping as a documentary on fast-drying paints. But during a two-week period in February, two of the biggest names in U.S. paper and board manufacturing paired off with large, foreign counterparts in one of the biggest consolidation waves in industry history. When the smoke cleared: UPM-Kymmene, of Finland, purchased Stamford, CT-based Champion International. Finnish-Swedish manufacturer Stora Enso acquired Chicago-based Consolidated Papers, less than a month after buying Norweigan paper wholesaler Carl Emil