Goldsmith Buys 8.7% Interest in Zellerbach

A group headed by Anglo-French financier Sir James Goldsmith said Tuesday that it has purchased an 8.7% stake in Crown Zellerbach Corp. for $78.3 million and may seek control of the San Francisco--based paper, packaging and forest products company.

In a 57-page filing with the Securities and Exchange Commission, the Goldsmith group also attacked the so-called poison pill anti-takeover provision established by the forest products company’s directors last year as “detrimental to and destructive of the interests and rights of shareholders.”

Goldsmith’s move on Zellerbach comes as no surprise. Last December, he had notified Zellerbach of his intention to acquire a stake of up to 25% of the company. Known as a corporate raider, Goldsmith long has coveted U.S. companies in the forest products industry, acquiring--and later dismembering--Diamond International Corp. in 1982. More recently, he has taken unsuccessful runs at two other companies with vast timber holdings, St. Regis Corp. and Continental Group Inc.

Analysts and competitors have long considered Zellerbach vulnerable to a hostile takeover because of its own rich timber holdings--nearly 2 million acres in Oregon, Washington, Louisiana and Mississippi--and its lackluster financial performance in recent years.

Moreover, corporate insiders, who might be expected to resist a takeover, control only about 3% of Zellerbach’s 27.2 million shares of common stock outstanding.

Trading in Zellerbach’s shares was unusually active last week, leading many Wall Street observers to surmise that Goldsmith had been buying the stock. Zellerbach’s common shares closed Tuesday at $37, up 75 cents, in composite New York Stock Exchange trading. About 233, 800 shares changes hands.

In the past 12 months, Zellerbach’s shares have traded as low as $27.75.

Goldsmith, who purchased the bulk of his stake in Zellerbach through Cayman Islands-based General Oriental Investments Ltd., said in the SEC filing that the acquisition was for “investment.”

However, the filing added, “depending upon developments,” the Goldsmith group “may pursue various possible courses of action.”

The filing said those actions might include seeking control of Zellerbach, seeking representation on its board of directors, proposing a merger with Zellerbach or “otherwise seeking to influence the management and policies of the company.”

The Goldsmith group took particular aim at Zellerbach’s so-called poison pill, the shareholder rights granted by Zellerbach last year in order to frustrate unfriendly suitors.

The rights, which are not triggered until a raider acquires 20% of Zellerbach’s shares, give their holders the right to buy two shares of the surviving company after a hostile acquisition for the price of one.

The rights, if upheld after what takeover experts say is an inevitable court challenge, would make a Zellerbach acquisition far more costly.

In a brief statement issued yesterday, Zellerbach defended the rights, saying that they would help shareholders to receive “fair and equal treatment” in the event of an unsolicited takeover. Zellerbach’s defense against a hostile takeover, which is spearheaded by New York lawyer Martin Lipton, recently got a boost when a Delaware court upheld similar rights issued by Household International Inc.

Without elaborating Zellerbach said Goldsmith’s attack on the shareholder rights “reveal what may be Goldsmith’s real agenda.”

The company also said that its board, which has a regular meeting scheduled for later this week, “will not do anything to compromise or violate the best interests of Crown Zellerbach, its shareholders, employees, customers and the communities it serves.”

Observers took the statement to mean that Zellerbach, whose investment banker is New York-based Salomon Bros. Inc., will resist Goldsmith’s overtures and perhaps seek a “white knight” for a friendly takeover. A Zellerbach spokesman declined comment.

As previously reported, in 1984 Zellerbach posted net income of $86.9 million, or $2.61 a share, on sales of $3.09 billion. In 1983, the company earned $87.8 million, or $2.54 a share, on sales of $2.69 billion.