Hammermill Talks Spur Group to Sweeten Offer

A group led by California investor Paul Bilzerian sweetened its all-cash offer for Hammermill Paper on Friday and offered $57 a share after the company disclosed that it has begun talking with third parties about alternative deals to thwart a hostile takeover attempt.

Bilzerian, a former Florida real estate investor with offices in Sacramento, first proposed the offer--$5 a share more than the group’s original offer--during a nearly two-hour meeting Thursday with Hammermill President W. Craig McClelland. The offer was confirmed Friday in a letter sent to McClelland.

Bilzerian said in an interview Friday that the new offer is a defensive move to keep his group’s offer competitive in light of Hammermill’s escalating stock price and disclosures Thursday that Hammermill had entered into talks with several companies about a merger or sale of assets. He said the new offer was not based on a review of any new Hammermill financial information.

“It doesn’t make us feel confident that they are talking to others,” Bilzerian said.

Bilzerian launched the tender offer July 25, saying his group already controlled about 20% of Hammermill’s stock. In response, management has urged shareholders not to sell to the group. Since then, the company, in a filing with the Securities and Exchange Commission, said it had initiated merger talks with other companies as well as exploring possible defensive acquisitions.

A spokeswoman for Erie, Pa.-based Hammermill, a major producer of fine writing papers and other paper products, would not comment on the Bilzerian group’s new offer. Nor would she identify the companies with which Hammermill was holding discussions.

However, New York investment analysts said that the companies probably include Georgia-Pacific Corp. in Atlanta, Mead Corp. of Dayton, Ohio, International Paper Co., New York, and James River Corp. in Richmond, Va.--all major paper companies.

Since the takeover attempt was launched, the price of Hammermill stock has surged from $48.75 on July 24. In trading Friday on the New York Stock Exchange, Hammermill closed at $59, up $1.87 1/2.

In his letter to Hammermill, Bilzerian said his group was prepared to further sweeten its offer if increases were justified by a review of Hammermill’s confidential information. “My sense is that they are going to complete this deal in the next few days,” with or without him, Bilzerian said.