Maxxam’s $800-Million Offer Termed ‘Inadequate’ : Pacific Lumber Rejects Tender Bid
San Francisco-based Pacific Lumber rejected as “inadequate” and “possibly illusory” an unsolicited tender offer for 95.4% of its stock from financier Charles Hurwitz at $38.50 a share, or nearly $800 million cash.
Hurwitz’s Maxxam Group, which says it already owns the other 4.6%, thus making it Pacific’s largest known shareholder, responded that it still intends to proceed with the offer.
Pacific, a major Northern California landowner and producer of redwood lumber, also said its board adopted some new anti-takeover measures and told its management to explore transactions that would give its shareholders “more value.”
Such steps might include seeking a “white knight” competitor for the shares, a Pacific spokesman agreed. This could set the stage for a major takeover battle.
The market reacted Thursday by bidding up Pacific’s shares to a closing price of $39.875 a share, up 37.5 cents, in New York Stock Exchange composite trading. As recently as Sept. 26, just before Hurwitz announced the offer, the stock was trading at $30.
Pacific said its board unanimously rejected Maxxam’s offer after its financial adviser, Salomon Bros., expressed its opinion that the Maxxam offer is inadequate.
“It seems unconscionable that a company and its stockholders can be subjected to a disruptive and possibly illusory tender offer where the financing is not secured and when there’s no assurance that the money will ever be there,” said Gene G. Elam, Pacific’s president and chief executive.
Filed Suit in San Francisco
The lumber firm combined its strongly worded rejection with the filing of a lawsuit in U.S. District Court in San Francisco, accusing Maxxam, Hurwitz and other affiliates of the Houston-based takeover specialist of violating federal securities laws.
Hurwitz’s response indicated that he was not backing away from what might be a hostile takeover attempt. “We are proceeding with our all-cash offer of $38.50 per share,” he said in a statement.
He suggested that a meeting with Pacific’s board and management “in a constructive and objective manner” could assure Pacific’s shareholders and employees that the proposed transaction serves the company’s best interests. “With or without such a meeting,” he said, “our all-cash offer for all Pacific Lumber shares is proceeding.”
Hurwitz, 45, a low-key, press-shy former mutual funds manager on Wall Street, surprised the financial community in 1978 when he succeeded in taking control of Los Angeles-based McCullough Oil (now MCO Holdings) over management’s opposition.
Pacific’s Elam said Thursday that Maxxam “has not even asked its financial adviser, Drexel Burnham Lambert, to begin seeking commitments for the $400 million that the investment banker said it was ‘highly confident’ it could obtain within 10 business days of being asked to do so.”
Elam said Maxxam would have to pay an added $4.5 million in fees for the obtaining of such commitments, whether used or not. He added: “Mr. Hurwitz’s hesitation in pursuing the financing process casts serious doubt on his commitment and belief in his offer.”
Hurwitz’s response said the financing “simply is not an issue,” adding: “As we said before, we are highly confident--and have the assurance of our investment and commercial banks--that financing . . . is appropriately assured.”
