Weyerhaeuser Confident As Willamette Count Continues

More than three weeks after a crucial stockholder vote, Weyerhaeuser Co.'s hostile takeover attempt of Willamette Industries remained undecided.

At presstime, a final tally of the June 7 vote for three Willamette directors still had not been released. If Weyerhaeuser's three nominees are selected, the company would possess a greater bargaining position for the planned acquisition.

Minutes after the shareholder meeting, Weyerhaeuser proclaimed victory.

Weyerhaeuser c.e.o. Steven Rogel said early vote tallies demonstrated a "nice margin-one that's broad enough for us to claim victory."

Willamette countered that the outcome was too close to call. A third party agency was charged with independently counting the votes.

Weyerhaeuser vowed to bow out if it lost the vote. Willamette. however. might not give up the fight as quickly. Both chairman William Swindells and c.e.o. Duane McDougall hinted that if Weyerhaeuser's nominees were elect- ed, Willamette might resort to its entrenched poison-pill defense. Swindells said he believes Weyerhaeuser nominees would act in the best interest of Willamette shareholders-and realize the merits of Willamette's defensive actions. l^r rtf inn-odno technology combined with oldfashioned customer service. How smart is that?

If, as expected, the nominees proved uncooperative, they could be marginalized on the nine-member board, at least until next year's annual meeting. "To be quite frank," Swindells said, "they're trying to steal the best company in the industry."

Ironically, months of politicking and posturing, capped by a flurry of expensive newspaper advertising and the emotional shareholder meeting, was followed by weeks of eerie silence by both companies.

Finally, during the last week of June, Rogel visited several Portland reporters and community leaders. He assured them that, if the takeover bid was successful, few Oregonians would lose jobs and Oregon timberlands wouldn't be aggressively logged to pay off debt.

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"Willamette doesn't have much fat to trim," he said, explaining that the $300 million Weyerhaeuser expects to save by merging the two firms is an approximation based on "synergies," not staff cuts. Rogel predicted it would take about four years to reduce the additional debt load Weyerhaeuser would have to take on.

He also explained that a merger was in both companies' best interest, since consolidation in the timber industry is necessary to compete in the global marketplace.

Housing Boom Hangover Seen

A strong consumer sector in the U.S. economy will keep the nation from slipping into recession, but the construction industry should prepare for a significant slowdown as commercial occupancy rates tumble and the business sector continues to soften, according to a leading economist.

"In the past three to five years, we have been in an extraordinary period," Raymond G. Torto, principal and managing director of Torto Wheaton Research, told a gathering of construction executives. "And the year 2000 was the party that gave us the hangover we are now suffering from. It would be totally incorrect to look back on that three-to-five-year cycle and expect the economy to come out of its soft landing next year and perform as it has in the past. Totally incorrect."

Torto said the heady days of the late 1990s and the year 2000 experienced "tremendous" growth of about 57o per year in the nation's Gross Domestic Product, a key barometer of economic health with direct correlation to the strength of the real estate industry. The traditional 25-year average GDP growth rate is about three percent annually. Few can accurately predict what the GDP growth rate will be in the future, he said, advising his audience to "buckle down, keep your business in line with reality and your expectations in line with reality."

Torto continued, "What we are telling our clients is that we don't think there will be a recession. and there will be a soft landing. That's because we rate the economy in two sectors, the business sector and the consumer sector, and the business sector is weak and will continue to have very low profit reports through the end of this year. The consumer sector, though, will keep us alive and out of a recession."

A consumer sector strengthened by low interest rates and the Bush admin- istration's income tax cut and summer rebate will save the economy from recession as more and more people create discretionary income by lowering their mortgage rates through refinancing. "That has a dramatic effect on the economy," Torto said.

The tax cut alone is expected to help pump up the GDP by as much as $75 billion. And, Torto said, the creeping unemployment rate is not seen as a threat ofrecession because it currently stands at 4.4 to 4.5Vo, well below the 5.57o most economists see as the full employment unemployment rate. "Moving from 4.4 to 5 is not a serious problem," he said.

As long as interest rates are favorable, the multi-family and single-family construction sectors will remain strong, Torto said. In fact, many investors have adjusted their portfolios to include more multi-family ownership than ever before.

Government spending is another bright spot on the horizon for the construction industry. "There is a lot of good public construction money out there, and that side of the economy I do not see being adversely affected at all," he observed. "In fact, you could hold out quite well if you can shift your business into the public sector arena for the next year to 18 months, and then move it back into the private sector. That would be a good strategy, an ultimate strategy, that I would consider."

Overall, Torto noted, "My analysis of where reality is going is a severe slowdown in the construction business over the next 12 months. But if your business plan provides for your expectations and reality to come together, you will have a good year."

Timber Co. Acquisiton A Go

Plum Creek Timber Co.. Seattle. Wa., is proceeding with a nearly yearold agreement to purchase Timber Co. from Georgia-Pacific Corp., Atlanta, Ga., after learning the merger would be tax-free to both firms and their stockholders.

According to Plum Creek, an independent tax counsel determined that G-P could spin off the timberland unit, so it in turn could be sold without any adverse tax implications.

Both companies will seek approval of the deal at Aug. l5 shareholder meetings and anticipate the merger to close by the end of September, making Plum Creek the second-largest private timberland owner in the U.S.

"There's a difference between a distribution center and a corporate headquarters. It's certainly not as sexy."

- Randy Hertel, Denver, Co., realtor, on his city's half- he art e d att emp t to attract a proposed 900,000-sq. ft. Lowe's DC

Jerry's Says lt's Not For Sale

Contrary to rumors, 40-year-old Jerry's Home Improvement Center, Eugene, Or., is not for sale, according to owner Dennis Orem.

According to the rumor mill, Lowe's had acquired the firm, a matter that Orem emphatically denies, noting it would make more sense for the chain to build its own store rather than buy his.

"There have not been any offers made," he insists. "Customers have called and asked, 'What happens to our business now that you have been