Weyerhaeuser Makes Hostile Bid For Willamette Industries

Weyerhaeuser Co., Federal Way, Wa., has taken its $5.4 billion offer for Willamette Industries Inc.. Portland, Or., straight to Willamette's shareholders, weeks after its target's board unanimously rejected a similar unsolicited bid.

Stockholders have until Jan. 4 to decide whether to accept the offer. Willamette's board urged them not to take any action, claiming the $48-ashare bid does not reflect the company's value or growth potential and is an attempt to capitalize on low stock prices hurtby poor industry conditions.

Although Willamette has strong corporate defenses to fend off an

Lumber Demand To Slow

U.S. lumber demand will decline for a second consecutive year in 2001 due to a slowdown in new home construction, according to the Western Wood Products Association.

Demand is forecast to dip 1.27o to 53.4 billion bd. ft. next year, still the third-highest consumption year ever.

Higher interest rates are expected to cause a 4Vo decline in new home unwelcome suitor, merger analysts predict that the board, especially under shareholder pressure, may really be posturing for a higher offer.

Wey erh aeu ser s ay s i t first approached Willamette two years ago, began merger discussions last August, and submitted a formal proposal in early November. A week later, after receiving no response, Weyerhaeuser tried to exert pressure on the Willamette board by disclosing a letter writtento Willamette president and ceo Duane McDougall.In the letter, Weyerhaeuser chairman, ceo and president Steven Rogel said he was "astounded" that the Willamette board failed to act on Weyerhaeuser's pro- starts to 1.54 million units in 2001, creating a 4.8Vo dip in residential construction to 20 billion bd. ft.

Lumber demand in the remodel and repair markets is expected to increase by 1.57o to 15.9 million bd. ft., while all other market segments will remain constant. The housing, remodel/repair markets account for roughly lOTo of all U.S. lumber use.

Taking its cue from thelower posal. demand, Western mills are expected to trim production by 2.47o to 16.7 billion bd. ft., while overall production should fall 3.17o to 34.5 billion bd. ft.

At $48 a share, the first offer represented a 387o premium over Willamette'srecent stock Price, which promptly rose $l I to $45-3/4 a share following the announcement.

According to Rogel, a merger could save about $300 million a year, with 407o coming in the first year and SOVo in the second year. By the third year, the firms would be achieving all $300 million in savings. The deal also calls for Weyerhaeuser to assume $1.7 billion of Willamette debt.

A merger would create the second largest forest products firm in the U.S., behind only International Paper.

With the U.S.-Canadian agreement that limits lumber imports set to expire at the end of March, imPorts from our northern neighbor should rise to l9 billion bd. ft. in 2001. Imports from New Zealand, Latin America and Europe will also increase.