Two Wall Street advisory firms, representing institutional investors, have come down recommending the election of Weyerhaeuser-sponsored directors to the board of Willamette Industries at the crucial June 7 shareholder meeting in Portland, Oregon.
Weyerhaeuser claims the recommendations are favorable to its six-month long effort to acquire Willamette in what has developed as a strongly-resisted hostile takeover move. But Willamette continues to maintain that an increase in Weyerhaeuser's offer to $50 per share from its original $48 is inadequate, and refuses to negotiate with Weyerhaeuser at that level. Weyerhaeuser says it is willing to raise its offer, but not unless Willamette agrees to negotiate. Stalemate.
The $50 per share offer has now been extended to midnight on June 7, date of the shareholder meeting, when voting on the new directors will occur. In a meeting with Willamette managers and officers in Ruston in April, Willamette CEO Duane McDougal said the balloting results may not be known until sometime after June 7, depending upon how proxy votes are cast.
If the Weyerhaeuser slate wins the proxy fight to fill three director spots on the Willamette board, the fight for company control could continue, with Weyerhaeuser holding significantly less than a majority on the nine-member board. Weyerhaeuser has stated that if it loses the proxy fight for election of its slate to the board, it will give up the takeover bid and withdraw its offer.
Weyerhaeuser also said that if it is successful in electing the three members in the present proxy battle, and Willamette continues to refuse to negotiate "we intend to nominate a slate of directors for the election at Willamette's 2002 Annual meeting. However, if the Weyerhaeuser nominees are not elected on June 7," Weyerhaeuser said, "we will withdraw our offer, since it will take at least two more years, until the 2003 annual meeting, to effect a transaction not approved by the current Willamette board."
One analyst, Mark Wilde, a timber analyst with Deutsche Bank Alex Brown, Inc., was quoted as telling news agency Reuters, "I think Weyerhaeuser is going to get their three board seats. But I'm not sure getting the three seats will do much. I think we'll just have another year of stalemate. I think the time to negotiate is now." Wilde was quoted as saying Weyerhaeuser "ought to put its strongest offer on the table before the annual meeting."
Institutional Shareholder Services and Proxy Monitor, advisory firms who make recommendations for institutional investors during proxy fights, in late May said investors should support the Weyerhaeuser slate for election to the Willamette board.
Willamette President and CEO Duane McDougal said, "Proxy Monitor appears to have absorbed Weyerhaeuser's rhetoric, but ignores the hard economic facts behind our board's carefully considered actions. We have always said we would consider serious offers from anyone, but in our view, Weyerhaeuser's offers have simply not been in the ballpark. We think it is clear that most shareholders agree that Weyerhaeuser's offers have not reflected the value of the company."
McDougal said, "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."
The Willamette CEO said, "Our board is going to fight this battle consistent with its fiduciary obligations for as long as it takes."
After Weyerhaeuser raised its buyout offer from $48 to $50 per share, McDougal said, "We are disappointed that Weyerhaeuser has decided to continue its hostile actions, but are encouraged by the show of support we have received from our shareholders. The fact that less than 45 percent of shareholders have tendered into the current offer, a decline from prior extensions, supports our board's decision to reject that offer as inadequate."
On May 24, after the Proxy Monitor recommendation that shareholders vote for the Weyerhaeuser slate of director nominees, Weyerhaeuser issued a news release quoting from the Proxy Monitor recommendations:
"One has to wonder whether the Willamette board would accept any offer from Weyerhaeuser, or any other suitor for that matter. Management has consistently refused to negotiate with Weyerhaeuser, has not given any indication of a price it might accept, and has not looked for other buyers. Instead, the board's strategy seems to be concentrated on its own survival.
"The Willamette board appears to have lost sight of the fiduciary responsibility it owes to its shareholders, and for that reason, its credibility as well.
"Willamette's agreement with its financial advisor in this contest, Goldman Sachs & Co., is eye-popping as well."
Weyerhaeuser said that Willamette is paying Goldman Sachs $30 million to prevent a transaction with Weyerhaeuser.
Willamette shareholders have been mailed competing proxy authorizations by Willamette, the GREEN proxy card, and by Weyerhaeuser, the GOLD proxy card. Shares owned by individuals but held with a brokerage firm or bank can only be voted by the brokerage firm or bank, upon receipt of the proxy voting instruction from the owner. Stock owned by employees in a 401(k) account can only be voted by the plan trustee, upon instruction by the owner. Deadline for receipt of proxy instructions for 401(k) plan accounts was May 25.