Battle Resumes Between Goldsmith and Zellerbach

The battle between Sir James Goldsmith and Crown Zellerbach resumed with full fury Thursday.

Goldsmith, who holds a 26% stake in Zellerbach, said he may purchase additional shares of the forest-products company in an effort to thwart Zellerbach’s planned reorganization into three entities.

In a filing with the Securities and Exchange Commission, the Anglo-French financier also vowed to resume litigation against Zellerbach, which had fiercely resisted Goldsmith’s takeover bid last April of $42.50 a share.

The litigation had been suspended as a result of a May 25 truce negotiated between the parties. In lawsuits filed against Zellerbach, Goldsmith is attempting to invalidate the company’s so-called poison-pill shareholders rights that would greatly increase the cost of a Zellerbach takeover.

The rights, which were triggered earlier this year when Goldsmith increased his stake in Zellerbach to more than 20%, give their holders the right to purchase two shares of the surviving company after a merger for the price of one.

In his filing, Goldsmith said he opposed Zellerbach management’s restructuring plan because of “significant adverse tax consequences” and “the management entrenchment that would result from the restructuring.”

Under the plan, Zellerbach hopes to spin off its specialty packaging unit and form a limited partnership to liquidate, over eight years, most of Zellerbach’s timber holdings.

Goldsmith’s filing said he supported a different plan under which the timber would have been placed into a corporation rather than a limited partnership. The timber corporation contemplated by Goldsmith would have included 250,000 more acres than the Zellerbach-supported limited partnership as well as Zellerbach’s lease rights to its San Francisco headquarters.

The Goldsmith filing also disclosed that a still unidentified concern that approached Zellerbach about a possible acquisition last month would have acted in concert with the Goldsmith group. Had the company purchased Zellerbach, it would have divided up Zellerbach’s assets with the Goldsmith group, the filing said.