VOL. 126 | NO. 139 | Tuesday, July 19, 2011
Temple-Inland Rejects IP Bid
By Bill Dries
The attempt by Memphis-based International Paper Co. to takeover Temple-Inland Inc. was rebuffed Monday, July 18, by the board of the Austin, Texas-based company.
The Temple-Inland board voted specifically to recommend that its stockholders not tender their shares to IP, which is offering to buy all outstanding common shares of Temple-Inland at $30.60 per share in cash.
The board continues to disagree with IP’s read on the company’s net debt, saying it was $737 million at the end of the first quarter, not the $828 million cited in the IP offer.
“The Temple-Inland board is unanimous in its belief that the offer grossly undervalues Temple-Inland and its prospects, including its position as the return on asset leader in the corrugated packaging industry, expected benefits from box plant transformation, its low-cost building products operation, and its strategic place within the industry,” said Temple-Inland chairman and chief executive officer Doyle R. Simons, noting the company’s status as the third-largest producer of corrugated packaging in North America. IP is the largest.
“Temple-Inland is the largest remaining independent, publicly-held industry participant whose acquisition would fundamentally transform the industry, and IP’s offer does not appropriately compensate Temple-Inland’s stockholders for that strategic value,” read a company statement issued shortly after Monday’s unanimous board vote.
Temple-Inland executives cite “regulatory uncertainty” in such a merger, which would have to be approved by federal regulators.
But IP chairman and CEO John Faraci said earlier this month that his company is “confident in our ability” to get the approval of the federal government.
Faraci put the standalone value of the company at $21 to $24 per share.
There was no immediate comment from International Paper executives.
There could be more detailed reaction Thursday, July 28, when IP holds its quarterly earnings conference call.
But when IP made the offer July 11, Faraci described the Temple-Inland board’s price expectations as “unrealistic.”
“And their unwillingness to engage in any meaningful discussions with respect to value has left us with no alternative but to make our offer directly to Temple-Inland shareholders,” he said. “We are providing Temple-Inland shareholders the certainty of cash in the midst of a very uncertain economic environment.”
IP executives cite continued uncertainty about the return of new housing construction as an economic factor.
Goldman Sachs & Co. is financial adviser to Temple-Inland in the takeover attempt.
International Paper is represented by UBS Investment Bank and Evercore Partners.