| Forest ownership
moves away from companies Tom Kelly For most of the past 50 to 75 years, the business model for major forest products companies included ownership of everything from the land for growing trees to the mills for manufacturing. In some cases the model also included the "company town," where workers lived in company houses, shopped in company stores, sent their children to company schools, were treated by company doctors. The "company town" model went out of style in modern times, and now the picture is changing again, with the so-called "vertically integrated" model where the company owns the land and timber, hires the professional forestry staff, even owns the logging operation, rapidly becoming as over-with as the company town. A research study completed late last year by state and federal specialists, who concluded the executive summary to their report with this statement: "Within the next three years, we expect that there will exist only traditional forest products company that owns more than a million acres in the Southern United States." The research, funded by the Southern Research Station, with participation by Southern Region state and private forest industry, states, "Over 23 million acres of industrial timberland has changed ownership in the past five years in large transactions in the United States. The traditional vertically integrated forest products companies have been the sellers, and Timber Ivestment and Management Organizations (TIMOs) have been the purchasers. Trends appear to be continuing with additional timberland sales by integrated forest products companies. Timberland sales in the South alone account for over 18.3 million acres." Within the North Louisiana area during the period studied, Louisiana-Pacific sold its forest lands and closed its manufacturing plant at Urania, one of the oldest former "company towns" in the region. West Fraser South, subsidiary of the Canadian company now operating sawmills at Joyce, Louisiana, and Huttig, Arkansas, own no timberlands, having contracted with former owners, Plum Creek Timber Company, for timber supply. Smurfit-Stone Container at Hodge, Louisiana, one of the oldest paper mills in the region, originally a vertically integrated "company town" operator, owns no timberlands, and purchase chips and pulpwood from the open market. Weyerhaeuser Company, with paper, plywood, and engineered wood plants in Louisiana and Arkansas, as well as internationally, continues to own major timberlands, and maintains a staff of professional foresters, and utilizes private logging contractors for its wood supply. The Southern Research Station study says "Primary factors that companies cite for selling timberlands include (1) poor shareholder returns and need to increase these returns; (2) debt reduction through sale of timberland assets, usually in situations where consolidations in the industry has left large amounts of debt on companies balance sheets; (3) increased tax efficiency through the movement to more efficient tax entity structures such as Real Estate Investment Trusts (REITs) or Subchapter S Corporations, and (4) development of tax strategies that minimize impact of large capital gains. Additionally, the study says, forest products companies have come to recognize that raw materials for use in their mills are readily available in deep and mature markets throughout the United States. Louisiana ranks at the top of Southern states in volume of timberland sales between 1996 and 2004, according to the SRS report, with 3.63 million acres transferred. The major portion of that transaction would have been the approximately two million acres transferred in the acquisition of Willamette Industries, which remains in the vertically integrated corporate ownership class. For 12 southern states surveyed, the forestland sales
in acres were: |