| Willamette,
W'haeuser not talking by Tom Kelly Editor and Publisher Portland, Oregon, and Federal Way, Washington are just about two-and-a-half hours apart by car up and down the West Coast Interstate 5 highway, but they may as well be on two different planets, if a frosty exchange of correspondence between Willamette Industries, Inc. - in Portland - and Weyerhaeuser Corporation - in Federal Way, a suburb of Seattle, is an indicator of the status of negotiations in the hostile takeover battle between the two companies. A month ago, there was speculation in the stock markets and elsewhere that the contest might be breaking Weyerhaeuser's way, following an offer by a major holder of Willamette stock to sell at $55 per share - above the pretty-much standing offer of $50, from which Weyerhaeuser has refused so far to budge But, based on the total number of Willamette shares outstanding, raising the offer to meet a price for all shareholders which would be acceptable to the Willamette board would up the ante by around a billion dollars, and Weyerhaeuser apparently has not decided to go that high. Meanwhile, Weyerhaeuser routinely extended its cash offer of $50 per share to December 5, while an October 16 deadline set by Willamette to open negotiations at a level in line with its proposed values passed with no publicly expressed interest from Weyerhaeuser. At expiration of the last deadline on October 17, Weyerhaeuser reported that 51.7 million shares of Willamette stock had been tendered and not withdrawn. The latest flurry of correspondence began on September
28, when Richard M. Clark, son of the late Willamette
director Maurie D. Clark, sent the following letter to
William Swindells, chairman of Willamette's Board of
Directors, and Steven Rogel, chairman and CEO of
Weyerhaeuser: "As the personal representative of the estate, and acting in that capacity, I ask both of you to arrange a meeting of Willamette Industries and Weyerhaeuser personnel to see if you can reach agreement on a sales price of Willamette Industries which will be acceptable to the majority of Willamette shareholders. "In an effort to get things moving in that
direction, I am prepared to tender all of the Estate's
outstanding shares of Willamette Industries' common stock
to Weyerhaeuser, should Weyerhaeuser agree to raise the
bid price to $55 per share. "Personal Representative "I continue to concur with the Board of Willamette that Weyerhaeuser's $50 per share offer seriously undervalues Willamette Industries. I continue to be prepared to tender the estate's shares should Weyerhaeuser agree to raise the bid price to not less than $55 per share. "The tragic events in New York and Washington have clearly put pressure on the financial markets, but these unique events do not affect the long term value of Willamette and I see no reason to sell the Clark shares for far less than they are worth." Following on the Clark letter, on October 11 Willamette Industries sent the following letter to Weyerhaeuser. "Mr. Steven R. Rogel "Dear Mr. Rogel, "We continue to believe Weyerhaeuser's existing offer in woefully inadequate. While the tragic events of September 11 have temporarily impacted financial markets, the fundamental value of Willamette remains unchanged. We have said all along that we would listen to serious offers. We believe that Willamette's current value is in the $60s and we are confident that pursuit of our strategic plan will substantially increase Willamette's value over time. "To offer a path forward, if you make a written offer in the high $50s, we will agree to sit down for discussions regarding a possible combination of our two companies. These discussions would also need to include ways to mitigate the impact on our communities and employees. "Based on your twenty-five years with Willamette and the last three years spent in evaluating the acquisition of this company, you know the value of Willamette and the substantial strategic and financial benefits Weyerhaeuser would derive. We note to support this point, our strong results of operations, the highly accretive nature of the transaction to Weyerhaeuser, and the attached document prepared by Weyerhaeuser showing potential synergies of up to $645 million plus the creation of an additional $1.1 billion (or $10 per share) in shareholder value as estimated by Morgan Stanley. Nevertheless, to facilitate your response, we have authorized Goldman Sachs to be available to respond to reasonable inquiries from your investment bankers. "Let us be clear: This letter is not an invitation to a counter-proposal which does not meet criteria we have described above. "If Weyerhaeuser is unwilling to pay what this company is worth, we will continue to pursue our strategic plan, which may include a significant business combination, recapitalization or other strategic or financial alternatives. "If we do not receive your written offer by 5 p.m. PDT Tuesday, October 16, we will assume you do not wish to proceed. In that event, we would urge Weyerhaeuser to withdraw its inadequate offer and cease the hostile attack on Willamette. "Sincerely, The immediate brief response from Weyerhaeuser, also dated October 11, was negative, and was followed on October 12 by another longer letter from Weyerhaeuser slightly less negative. The October 11 letter states: "Dear Messrs Swindells and McDOugall\ "Your letter of today is simply another way for you to just say no to discussions with Weyerhaeuser. We believe that our existing $50 per share offer is a fair price for Willamette. However, we have said that we are willing to increase our price if Willamette will engage in meaningful negotiations with us. We are not going to increase our price, however, merely to begin discussions that, based on your letter, would not be productive. "We look forward to hearing from you when you come to a more realistic view as to a fair value for Willamette. "Sincerely yours, This letter was followed by on October 12 by one in a slightly different tone: "Willamette Industries "Dear Messrs. Swindells and McDougall: "I am writing to make sure that you, your board of directors, and your shareholders understand Weyerhaeuser's views as to the synergies that could be attained through the combination of Willamette Industries and Weyerhaeuser. In your letter of October 11, you refer to synergy and value enhancement estimates prepared in September 1998. As set forth below, these rough estimates for discussion purposes at that time are simply not relevant to a combination of our companies today. "The synergy figures to which you refer were derived from an internal working draft prepared over three years ago. This draft meant to serve as the starting point for discussions in 1998 between our two companies about the synergies that we might attain following a combination. Let me remind you that you refused to engage in any meaningful discussions with us in 1998, just as you have refused to do since then. "A significant portion of the potential benefits was based on process improvements and capital deployment efficiencies that Weyerhaeuser has since implemented. "Furthermore, since 1998, Weyerhaeuser has completed three significant acquisitions: The Dryden mills, MacMillan Bloedel, and Trus Joist International. These acquisitions have allowed us to further focus and streamline our business, resulting in significant cost savings. "In short, Weyerhaeuser has not stood still since 1998. Through the efforts of our dedicated employees, we have made significant progress in capturing many of the opportunities to improve our business we saw three years ago. Accordingly, many of the potential benefits outlined in the 1998 estimates have either been achieved, or are no longer relevant to our business. Many things have changed since 1998, and I would not want reliance on old estimates to prevent our companies from completing a mutually beneficial transaction "As we have previously stated, Weyerhaeuser's best estimate, based on publicly available information, of the synergies that could be realistically achieved is $300 million, and our $50 per share cash offer incorporates that estimate. You have never disclosed any information about Willamette that would allow us to identify potential synergies excess of this amount. We are prepared to meet with you at any time to discuss information that you have regarding synergies available in the context of a business combination today. "Sincerely yours, |