Fibre still quiet amid buyout talk
Saturday, January 27, 2007 11:49 PM PST
By Evan Caldwell
Printable version
E-mail this articleSix months after Longview Fibre Co., pressured by a hostile takeover bid, announced it would consider selling the company, shareholders and insiders say management may be exploring the possibility of taking the company private.
Possibly three groups have buyout offers in for Fibre, including the $1.4 billion offer from two Portland investment firms, Obsidian Finance and the Campbell Group, according to experts. It was the Obsidian/Campbell offer that forced Fibre to consider a sale.
An announcement on the buyout proposals is expected by the end of February, according to dealReporter, a global independent service providing information and analysis of the financial sector. For the Fibre research, dealReporter anonymously interviewed several shareholders, insiders and bankers.
Obsidian and Campbell officials declined comment last week, citing a confidentiality agreement. Fibre also has been mum since the initial efforts to purchase the company surfaced last spring.
Fibre also might be exploring deals that would take the company private or split the company's lucrative timberlands from its struggling manufacturing operations, according to dealReporter, shareholders and analysts.
Fibre officials again declined comment last week. During the company's November third quarter financial results conference call, Fibre CEO Rick Wollenberg didn't address or answer questions about the company's look into "strategic alternatives" to benefit shareholders, which could include the sale of the company.
"The silence has been deafening," said Paul Latta, who follows Fibre for Seattle brokerage McAdams Wright Ragen. "There has been a little bit of these rumormills starting to circulate. But at some point (Wollenberg) will need to address the situation and give some sort of update, sometime soon."
Analyst Steve Chercover of the D. A. Davidson brokerage in Lake Oswego, Ore., agreed. "It seems like this thing is 11 months pregnant," he said. "I've been expecting to hear something for a while."
Fibre's next public conference call, which will discuss fourth quarter earnings, has yet to be scheduled.
Industry experts say possible players include Rayonier Inc. and unknown private equity investors. Florida-based Rayonier is a Real Estate Investment Trust, or REIT.
Fibre converted to a REIT in 2006, allowing the company's timberlands to avoid corporate income taxes, which makes Fibre more attractive to Wall Street investors.
Of the other REITS --- Plum Creek Timber Co. and Potlatch Co. --- Rayonier is "the only viable one out there that could make a run at Longview," Latta said.
According to dealReporter, shareholders believe Rayonier wants control of the timberlands, with current management maintaining control of the manufacturing facilities, which include the Longview plant, the town's second-largest employer with about 1,750 workers. Rayonier did not return phone messages last week.
Fibre embraced a new operating plan last April that called for increasing timber harvests and possibly selling some plants east of the Rocky Mountains.
However, during much of Fibre's history, timber has been subsidizing mill operations and "has basically been keeping the company alive," Latta said. "(To an outside company,) they probably are better off with the mill dead than alive, which doesn't sound good for Longview."
However, Latta, dealReporter and other shareholders say Fibre could separate timberlands from mill operations. But to put the "mill out on its own is a risky situation for the town of Longview," Latta said.
Detailed information about large corporate transactions is historically unavailable due to insider trading laws.
As a publically-traded company, Fibre sells stocks which trade on the open market. If private, Fibre would be owned by a small group of people or an individual and not offer shares to the public.
"Management has probably looked at everything and probably found some good reasons to go private," said Bill Parish, president and CEO of Parish & Co., Investment Management & Research Services in Portland, who represents some Fibre stockholders. "My guess is that they don't want to sell but they may want to go private."
However, Parish said he is wary of private equity firms buying Fibre, taking the company private only to turn around and take it public five years down the road.
"Private equity firms are going out and flipping companies to make money," Parish said. "They are not concerned about the operations or employees."
Private companies can use the losses from one company to offset the profits of another company and avoid paying taxes, said Parish, who added that he has talked directly to Wollenberg twice recently.
"I see Fibre wanting to strike a deal but afraid to strike a deal," he said. "Afraid because it would be difficult to strike a deal that would be of benefit to current shareholders and employees."
People interviewed by dealReporter also noted that they think private equity stakeholders might be interested in Fibre.
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