Longview Fibre

SOURCE: Longview Daily News.

Quote from Parish & Company: "Shareholders are the loser here," said Bill Parish, president and CEO of Parish & Co., Investment Management & Research Services in Portland, who represents some Fibre stockholders. Brookfield's $16.5 billion of debt and $5.8 billion in revenue is a bad sign, Parish said. "It's highly leveraged and they need something to buttress up their assets, which is the timberlands," he said. "They will accelerate harvest."

Parish, who said his clients will vote "no" on the buyout, said he figures that Fibre shareholders would earn more under Fibre's current leadership and management plans. "Is management looking out for the long-term, or are they looking out for the short-term?" he said. "That never gets mentioned. It is a big question. Maybe that stock is worth $100 is five years. We just have this short-term outlook."

Complete Article:

Fibre agrees to sell

By Evan Caldwell

Feb 05, 2007 - 11:45:03 pm PST

The sale of Longview Fibre Co. to a Canadian firm "is good news for the community," Fibre President and CEO R.H. "Rick" Wollenberg said Monday, and the prospective new owners say they will continue to operate the Longview pulp and paper mill.

"We are quite comfortable there is a business model here that we can continue," said Reid Carter, a managing partner for Toronto-based Brookfield Asset Management. "The mill was in better shape than we expected."

However, Carter and other Brookfield officials declined to project future employment levels, nor would they detail their long-term strategy for Fibre's manufacturing operations here and across the nation. Under the deal, union and pension contracts will not be affected, both parties said.

Fibre and Brookfield, a Toronto-based asset management company with interests across the Western Hemisphere, announced the $2.15 billion agreement Monday.

The deal will sever the close local ties between the community and Fibre, which was founded locally in the 1920s and which has been run by a cadre of management insiders with close and long ties to Cowlitz County.

In an interview at The Daily News, Brookfield officials said they would split manufacturing operations from the timberlands and turn both segments private. While the company's timber division has been profitable, it's pulp and paper business has been losing money or made only marginal profits for more than a decade.

After months of speculation over the company's future, Wollenberg, the third generation of his family to run the company, seemed relieved that a decision has been made. He nearly broke down several times during the interview.

"It's a bittersweet thing, its a big change," Wollenberg said. "But Brookfield brings the right values to the table. From many standpoints, it was the thing we need to do to get the best value for the shareholders and ensure the long-term survivability of the business."

Fibre has been a takeover target since a two Portland-based investor groups pitched an offer about a year ago, and on July 19 Fibre began soliciting buyout offers.

The city of Longview has seen a major employer's ownership change hands with drastic results. In 2001, Longview Aluminum, formerly Reynolds Metals Co., shut down and left 950 out of work. Michael Lynch made making millions selling back the electricity the smelter would have used, but he then reneged on a promise to restart the plant.

"My gut feeling is that this won't be another Reynolds," said Paul Latta, an analyst with McAdams Wright Regan in Seattle. "Never say never, but it seems unlikely that in the near term the mill would be shut down."

Unlike Lynch, Brookfield comes with a track record of running credible, successful companies, including timberlands, Latta said.

Brookfield officials from Vancouver, B.C., spent much of Monday touring Fibre and telling workers at every level about their plans to continue operations.

"We see lots of opportunity here," Carter said. "This is a business that can be improved. We look at it as we will own these assets forever. Timberlands are a very long-term investment. We are going to work very hard to prove there is value in this business."

Carter said if the sale is approved by shareholders mill and timber operations would remain in place but their strengths and weaknesses would be re-evaluated in the medium term.

Hugh Sutcliffe, a managing partner with Brookfield, said the company wouldn't put shareholder money on the table and spend four months conducting detailed research into Fibre if they didn't think the pulp and paper operations could be successful.

"We are confident ... we can work together to succeed," Sutcliffe said.

Brookfield owns the controlling share --- 48 percent --- of Toronto-based Fraser Papers, which runs five pulp and paper mills in the Eastern Canada and Eastern United States. Fraser also is buying additional pulp mills.

In addition, the company owns Vancouver, B.C.,-based Western Forest Products, which closed a pulp and paper mill in 2006. Brookfield also owns Norbord Inc., a Toronto-based wood products company.

Longview Fibre employs about 3,100 people around the country, with about 1,700 workers at the pulp and cardboard plants and company headquarters in Longview.

In March, Fibre rejected a $1.75 billion buyout offer from Obsidian Finance Group LLC, a private equity firm, and the Campbell Group LLC, a timber investment management company. After they raised the offer, Fibre announced it was exploring sale alternatives. Representatives from Obsidian and Campbell did not return phone messages Monday.

Latta said Longview's sale represents "the end of an era" for a company.

"Which is not necessarily a bad thing," he said. "New owners might have a fresh way of looking at things that the former management just didn't."

Steve Chercover, an analyst at D. A. Davidson brokerage in Lake Oswego, Ore., told The Associated Press it appears Fibre made the right move, even if management hadn't initially wanted to sell the company.

"It was a long, drawn-out process, but no one can accuse them of not acting in the interests of their shareholders over time," Chercover said.

Wollenberg said the deal fulfills Fibre's fiduciary duty, which requires the company acts in shareholders' best interest.

However, some shareholders say the deal is not in their best interest.

"Shareholders are the loser here," said Bill Parish, president and CEO of Parish & Co., Investment Management & Research Services in Portland, who represents some Fibre stockholders.

Brookfield's $16.5 billion of debt and $5.8 billion in revenue is a bad sign, Parish said. "It's highly leveraged and they need something to buttress up their assets, which is the timberlands," he said. "They will accelerate harvest."

Parish, who said his clients will vote "no" on the buyout, said he figures that Fibre shareholders would earn more under Fibre's current leadership and management plans.

"Is management looking out for the long-term, or are they looking out for the short-term?" he said. "That never gets mentioned. It is a big question. Maybe that stock is worth $100 is five years. We just have this short-term outlook."

George Schwartz, a retired former chief financial officer at Fibre, said he feels the deal is in the best interest of the shareholders.

"If the board took a position adverse to the stockholders they would be liable for all sorts of lawsuits," Schwartz said.

However, the opposite could be true, too. One lawyer, Guri Ademi, has even posted messages online asking for upset shareholders to contact him to join a possible lawsuit to stop the deal. Ademi is a partner with Ademi & O'Reilly, LLP, in Cudahy, Wisc.

Bob Guide, a retired Fibre vice president of manufacturing services, said a sale was inevitable.

"Something had to be done about the local mill. It was unprofitable and has to be made profitable, and this is the way to do it," he said. "I think Brookfield is a very responsible company. I've looked at their Web site and I'm impressed by what they do and what they've done in past. So my hope is they will continue to operate this mill but in a much more restricted form."

Wollenberg declined to say how many other offers were on the table for the company.

"We looked at all the alternatives, including what we could do ourselves, and we felt that a cash offer today was really truly what was best for our shareholders," Wollenberg said. " ... At the end of the day you hope that you see the shareholders get the best deal and at the same time the community and employees get the best deal."

Bill Parish
Parish & Company
10260 SW Greenburg Rd., Suite 400
Portland, OR 97223
Tel: 503-643-6999 Fax: 503-221-3161
email: bill@billparish.com

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