Financial Times, May 15, 2001 article

COMPANIES & FINANCE INTERNATIONAL: Adviser asked to step into paper battle
Financial Times; May 15, 2001
By SCOTT MORRISON

Disgruntled shareholders of Willamette, the US forest products group targeted by Weyerhaeuser, have asked a corporate governance adviser to get involved in the bitter takeover battle between the two rivals, a move seen as increasing the pressure on Willamette's reluctant board.

The request comes after Willamette said last week that Weyerhaeuser's revised Dollars 5.5bn offer was still too low.

Weyerhaeuser's revised offer, which includes USDollars 1.7bn in assumed debt, was an attempt to break the six-month deadlock between the two US paper companies and bring its rival to the negotiating table.

Gary Lutin, an investment banker who now acts as a corporate governance adviser, said yesterday he would sponsor a shareholders' forum through which all Willamette shareholders would be able to share information and views with Willamette's directors.

But Mr Lutin said he was disappointed by the initial response from Duane McDougall, Willamette's chief executive.

Mr Lutin said he was told that Willamette's board did not want to hear alternatives to the recommendations provided by the firm's advisers.

Weyerhaeuser has said more than 50 per cent of Willamette's shareholders have accepted its bid. It was hoped that Willamette's board would be pressed to take into account pro-merger opinions voiced through the forum.

In a letter to William Swindells, chairman of Willamette's board, Mr Lutin said Willamette's defensive position precluded the kind of co-operative exploration that would normally lead to negotiations allowing Weyerhaeuser to increase its bid by 5-15 per cent.

It has been widely believed that Weyerhaeuser would increase its offer if Willamette agreed to negotiate.

Mr Lutin said the terms under which Willamette engaged Goldman Sachs - a USDollars 30m payment if there is no transaction by September 1, 2001 - created a significant financial incentive for the adviser to prevent or at least delay a combination.

Mr Lutin said he hoped for a resolution before next month, when Willamette shareholders are scheduled to vote for three new members of the company's nine-member board.

Weyerhaeuser has nominated three candidates and appears likely to win its bid to install its nominees on Willamette's board.

While that would not give Weyerhaeuser control of Willamette's board, it would create an embarrassing and difficult situation.

Mr Lutin said the shareholder vote would usher in a situation that would be "terribly destructive" for Willamette.

Willamette declined to comment yesterday.