Zellerbach, Goldsmith Call a Truce : Financier Hikes Stake Above 50%; Adversaries Talking

Sir James Goldsmith and Crown Zellerbach called a five-day truce in their marathon takeover battle Monday after a group led by Goldsmith boosted its stake in the asset-rich forest products company to more than 50% of the outstanding common shares.

In a joint statement, Zellerbach and Goldsmith’s General Oriental Securities Limited Partnership said they are “engaged in discussions to resolve matters between them.”

Although neither side would comment on the brief announcement, analysts said the combatants were probably discussing the terms of Zellerbach’s surrender.

“It’s very difficult to ignore a shareholder who has 51%, bylaws or no bylaws,” said George B. Adler, forest products analyst for Smith Barney, Harris Upham. “That’s the real world.”

Zellerbach’s bylaws require a two-thirds vote to oust the company’s directors. Goldsmith, however, contends that a simple majority is all that he needs to take control of the company.

In Monday’s statement, Zellerbach said it has agreed to postpone its litigation against the Goldsmith group until Friday. Zellerbach also said it will not “commence or undertake any extraordinary transaction before that time.”

Goldsmith, in turn, agreed not to restart litigation against Zellerbach or to purchase any additional shares of the company. He also agreed not to demand a special shareholders meeting or to solicit proxies until Friday.

Plan to Split Up Firm

The battle between Goldsmith and Zellerbach flared earlier this month after the Anglo-French financier rejected Zellerbach’s plan to split itself into three separate entities: a timber partnership, a specialty packaging company and a slimmed-down paper and container concern. Goldsmith favored a plan that would have placed Zellerbach’s timber into a corporation.

In his effort to block the transaction, Goldsmith began adding to his 25% stake in the company. Zellerbach last week failed to win an injunction blocking the purchases. Goldsmith is believed to have bought nearly 2 million Zellerbach shares last Friday, setting the stage for the truce announcement. The company has 27.4 million shares outstanding.

On Monday, Zellerbach’s shares closed at $40.25, down $1.25 from Friday.

With Goldsmith holding a majority of its shares, Zellerbach may be running out of options. Goldsmith already holds one seat on the company’s 12-person board. And though the company staggers its directors’ terms, by simply waiting a few years Goldsmith would be able to gain a board majority.

But, analysts say, Goldsmith isn’t likely to wait. If Zellerbach doesn’t capitulate this week, Goldsmith would probably resume purchasing the company’s shares to bring his stake to more than two-thirds of those outstanding.

“He has obviously shown that he has ‘deep pockets,’ ” said Chad E. Brown, an analyst for Kidder, Peabody. “If I were in the position of Crown Zellerbach’s board, I’d assume he has the resources to go to two-thirds,” Brown added.

Brown and other analysts said there are a number of possible outcomes to the negotiations between Goldsmith and Zellerbach, all of them favorable to Goldsmith. One scenario has Goldsmith emerging as the dominant shareholder of a new corporation that would control Zellerbach’s vast timber holdings.

In another, Brown said, “he’d end up buying the whole thing and, presumably, resell parts of it to other companies,” retaining the timberland for himself.

Separately, Zellerbach reported that its second-quarter net income fell 51% to $21.5 million from $32.5 million a year earlier. Sales were about flat at $769.4 million, compared to $771.8 million a year ago.

William T. Creson, chairman, president and chief executive, blamed the earnings slump on “a slowdown in domestic economic activity, industry overcapacity and the continuing negative effects of the strong U.S. dollar.”

For the first half of 1985, net income fell 31% to $40.7 million as sales climbed 3% to $1.53 billion.