2 Paper Companies to Pare Down Assets
Louisiana-Pacific Corp. and Stone Container Corp. on Monday said separately that they plan to sell assets and use the cash to pay off debt and focus on their more profitable forest-products businesses.
Louisiana-Pacific plans to sell more than $1 billion in assets and cut 3,500 jobs, or about 29% of its work force, to focus on building products and reduce its debt by an unspecified amount. Stone Container will sell its wood-pulp businesses to focus on corrugated containers and cut $1.5 billion from its $4-billion debt.
The moves come as the companies struggle to generate steady income after two years of falling profits as customers stockpiled products amid a glut. Louisiana-Pacific and Stone Container are two of several major paper companies, including Champion International Corp., to sell peripheral units and cut borrowings.
Paying off debt “will make the stock and the bonds more attractive because it’s going to reduce risks,” said Paul Greenberg, director of high-yield research at Bear, Stearns & Co. “It’s very good for the paper industry.”
Portland, Ore.-based Louisiana-Pacific shares fell $1.63 to close at $21.25, while Stone Container was down $1.31 to $13.63 in New York Stock Exchange trading. The stocks fell as the Dow Jones industrial average dropped 554.26 points to 7,161.15 in its worst one-day point-plunge ever.
Louisiana-Pacific’s biggest asset sales will occur in California, where the company plans to sell 300,000 acres of timberland, a pulp mill, sawmills and two of three distribution centers.
“The assets we are selling are good businesses that simply do not fit our strategy,” said Mark Suwyn, the company’s chairman and chief executive, in a statement.
In three years, Louisiana-Pacific wants 25% of the building products it makes to be new or “significantly improved,” Suwyn said in an interview.
Louisiana-Pacific plans to use proceeds from the asset sales to pay down debt and to reinvest in its building-products businesses by making acquisitions or forming joint ventures, or possibly to buy back stock.
Louisiana-Pacific, which has 12,000 workers, had a loss of $200.7 million, or $1.87 a share, in 1996, compared with a loss of $51.7 million, or 48 cents, a year earlier. The company had losses in two of the three quarters this year.
Stone Container plans to get out of the wood-pulp business, which is subject to price swings brought on by imbalances of supply and demand. It will concentrate on paper and packaging to generate steadier earnings.
The Chicago-based company said it will restructure and then sell Stone Container (Canada) Inc., which owns a 25% stake in Abitibi-Consolidated Inc., a specialty pulp mill in Portage-du-Fort, Quebec; and a 50% interest in a corrugated-box joint venture with MacMillan Bloedel Ltd.
Stone Container hasn’t had a profit since the first quarter of 1996.
The restructurings follow similar announcements by International Paper Co., Georgia-Pacific Corp. and Fort James Corp. as lower prices and other problems have weighed down the paper industry’s profits.
