Zellerbach Board OKs Restructuring Despite Goldsmith’s Objection

Crown Zellerbach said Wednesday that its directors have decided to go ahead with a plan to split the forest-products company into three entities despite the opposition of board member Sir James Goldsmith, the Anglo-French corporate raider who holds a 26% stake in the company.

Zellerbach, in two 300-page filings with the Securities and Exchange Commission, also disclosed that its management offered to sell the entire company to Goldsmith for $50 a share but that the financier “rejected this proposal and made no counteroffer.”

In early April, Zellerbach had rejected a takeover bid of $807.5 million, or $42.50 a share, from Goldsmith.

Firm Was Approached

Zellerbach also reported that a New York Stock Exchange-listed company expressed interest in acquiring Zellerbach last month but that, after a “full-day” meeting between representatives of the two companies in San Francisco, no further meetings have been held. The other company’s identity wasn’t disclosed, although a source close to Zellerbach said it is also a forest-products company.

The decision to proceed with the reorganization marks the end of a six-week truce that suspended litigation between the 115-year-old asset-rich company and Goldsmith.

The Associated Press reported that Goldsmith was vacationing on a boat off the coast of Turkey and could not be reached immediately for comment.

Zellerbach said in its filing that negotiations with Goldsmith about the restructuring collapsed, in part, because the Goldsmith group wanted to make it “more difficult for stockholders other than the Goldsmith group” to participate in the plan.

Under the plan, shareholders will be able to exchange up to 13.5 million shares for stakes in Zellerbach’s specialty packaging unit and a limited partnership being organized to hold most of the company’s timber assets and mineral rights.

Zellerbach’s common stock closed up $1.125 a share at $40.50 in moderate trading Wednesday on the New York Stock Exchange.

For each share tendered, Zellerbach holders will receive one share of Cosyn Corp., the new name of the specialty packaging unit, and one depository unit in Landeq Ltd.

“The entire board, with the exception of Sir James Goldsmith, supports the proposed exchange,” said William T. Creson, Zellerbach’s chairman and chief executive.

“Mr. Goldsmith said he would have supported a restructuring with the timber assets being distributed in corporate form,” Creson continued. “However, after five weeks of discussions, we could not reach an agreement with Mr. Goldsmith on any form of restructuring.”

A source close to Zellerbach said the collapse of the negotiations sets the stage for a renewed legal battle in which “Goldsmith will attempt to block our plan for his own advantage.”

Will Sell Properties

Under Zellerbach’s plan, Landeq will hold about 1.65 million acres of forest land in Washington, Oregon, Louisiana and Mississippi. During negotiations, Zellerbach said, Goldsmith expressed concern about the tax consequences of the plan.

The partnership will dispose of the properties over an eight-year period and make distributions of net proceeds from time to time.

Zellerbach failed to place a market value on the land but said it was worth more than its book value of $800 million, the Associated Press said.

Cosyn, which will operate the company’s fast-growing specialty packaging business, which had 1984 sales of more than $400 million, will be headed by James A. Toney, currently group president for specialty packaging.

Creson will remain chairman and chief executive of the stripped-down Crown Zellerbach, while William R. Corbin, Zellerbach’s group president for timber and wood products, will head Landeq.

“After the exchange offer,” Creson said, “Crown will become clearly focused in its basic paper and container businesses.” He said that this will position the company for earnings growth and that “these earnings will be attributable to a much smaller number of outstanding shares.”

Zellerbach has 23.7 million shares of common stock outstanding.