Paper War Rages On

Two paper giants from the Northwest have been sparring. One wants to take over the other. Now shareholders have weighed in.

by ERIK CAGLE

The high-octane, acrimonious hostile takeover attempt of paper giant Willamette by fellow industry leader Weyerhaeuser appears far from over.

Battle lines were drawn June 7, when Willamette shareholders appeared to have voted Weyerhaeuser's three candidates onto Willamette's nine-member board of directors. Official results weren't expected for a few weeks, as of press time.

With its representatives in place, Weyerhaeuser vows to nominate another slate of directors for election at the 2002 annual meeting should Portland, Ore.-based Willamette continue refusing to negotiate.

Willamette counters that the current offer of $50 per share (roughly $5.5 billion) is not even "in the ballpark."

Though Willamette management feels the vote was too close to call, William Swindells, chairman and grandson of Willamette's founder, acknowledged: "Today's result indicates that a large number of our shareholders desire the board to consider some form of value-enhancing transaction."

The two companies are longstanding rivals. Steven Rogel, Weyerhaeuser chairman and CEO, left Willamette at the end of 1997, after 25 years there, to take over Weyerhaeuser. He has been attempting to purchase his former company ever since.

Should Federal Way, Wash.-based Weyerhaeuser prevail in its takeover attempt, it would create the second largest forest products company, behind only International Paper.

A Battle Of Words

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. Willamette called the offer's 4 percent increase from $48 "paltry."

On May 21, Weyerhaeuser said it might up the ante to bring 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," Rogel said in a statement.

Weyerhaeuser gained momentum when two of the leading proxy advisor firms, Proxy Monitor and Institutional Shareholder Services, 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 companies exchanged letters to their respective boards. Weyerhaeuser wrote, "Despite the fact that the Willamette board appears to believe that Willamette is worth more than its shares have ever achieved in the market, they have never disclosed at what price, if any, they would consider a sale transaction."

Willamette's CEO Duane C. McDougall issued a statement in response:

"Proxy Monitor appears to have absorbed Weyerhaeuser's rhetoric, but ignores the hard economic facts behind our board's carefully considered actions. Our board has never believed that Weyerhaeuser is willing to pay what we believe is a fair value for Willamette. While saying publicly that they want to do a deal quickly and hinting that they may offer more, they tell us privately that nothing has changed and they have nothing new to say. That's why we have not been willing to sit down with them."

According to a Wall Street Journal report, when Willamette booked the main ballroom at the Portland Art Museum for the annual meeting, Weyerhaeuser stealthily booked the remaining rooms under a different name.

Unfortunately for Weyerhaeuser, among the museum's benefactors are William Swindells and his wife, Ann, who have donated somewhere between $500,000 and $749,000. Once Weyerhaeuser's name came to light two weeks after the rooms were booked, the museum quickly refunded the company's money.