Boise Cascade selling timber and paper assets

By Samantha Zee and James Gunsalus
Bloomberg News / Seattle Times

Boise Cascade Chairman and CEO George Harad speaks to the media at the company's headquarters in Boise, Idaho, yesterday.

Boise Cascade agreed to sell its paper and timberland assets for about $3.2 billion in cash and change its name to OfficeMax, completing its transition from an Idaho-based timber company to the nation's third-largest office-products retailer.
Boise Cascade, which bought Ohio-based OfficeMax for $1.06 billion in December, is selling its timber and paper assets to Boise Cascade LLC, formed by Chicago-based buyout firm Madison Dearborn Partners. Boise Cascade will retain a 10 percent stake in Boise Cascade LLC once the sale is completed in November.

Chief Executive George Harad said the sale will fuel expansion of the office-supply business, which should have operating income of $210 million to $240 million this year.

Harad closed 45 OfficeMax stores in the first quarter and is cutting debt to compete against Staples, the largest office-supplies retailer. OfficeMax has more than 900 retail stores worldwide, plus 80 distribution centers.

"OfficeMax is a good franchise, but people don't really differentiate between Staples or Office Depot," said Steven Chercover, a forest-products analyst at D.A. Davidson who has a buy rating on Boise Cascade and doesn't own the stock.

"OfficeMax is the leader in business-to-business and direct merchandising. They can build on this by focusing on small- and medium-sized businesses," he said.

Harad will become executive chairman of OfficeMax, which will be traded on the New York Stock Exchange under the symbol OMX and be headquartered in Itasca, Ill., outside Chicago.

Thomas Stephens, former CEO at MacMillan Bloedel and Manville, will be CEO of Boise Cascade LLC, which will stay in Boise, Idaho. It will keep most of the employees who worked for the old company.

The deal had been long awaited by Wall Street, and some analysts argued the benefits were already built into the stock price. Shares of Boise Cascade fell 6 cents to $32.99 yesterday. They have risen 31 percent in the past year.

"The sale is the right decision for the company and at a pretty good price," said Marc Lehmann, who helps oversee $1.4 billion of assets at New York-based Jana Partners, which owns Boise Cascade stock.

"The sale doesn't change Boise Cascade's competitive position, but does focus management on one line of business," he said.

Madison Dearborn, which has $7.7 billion under management, invests in industrial, communications, health-care, consumer and financial companies.

The firm has bought three paper companies: Ireland's Jefferson Smurfit Group, Atlanta-based Riverwood Holding and Bay State Paper Holding based in Hyde Park, Mass.

Boise Cascade will sell off 22 wood-products facilities in the United States, Canada and Brazil, 27 wholesale building-distribution centers in the United States, ownership or control of more than 2.3 million acres of timber, five pulp and paper mills, two paper-converting plants, six distribution centers and five corrugated-container plants.

A limited number of jobs in Boise likely will be eliminated, Harad said, but would not elaborate.

Boise will get about $3.1 billion to $3.2 billion in cash proceeds from the sale and plans to use $2.2 billion to $2.3 billion of that to reduce debt.

The remaining $800 million to $1 billion will be returned to shareholders through stock buybacks, cash dividends or a combination, the company said.

Information from Reuters and The Associated Press is included in this report.



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