Forest products company Weyerhaeuser Co. on Monday offered to buy rival Willamette Industries Inc. for about $5.3 billion in a deal that would create one of North America's top lumber producers.
The unsolicited takeover offer--which at $48 a share represents a 38% premium over Willamette's closing stock price Friday--comes as the industry has been hit with a softening economy as well as low prices and slumping demand for lumber.
At the same time, companies are experiencing a period of consolidation, including Georgia-Pacific Corp.'s offer last month to buy Fort James Corp.
Weyerhaeuser, based in Federal Way, Wash., purchased Trus Joist MacMillan and Canada's MacMillan Bloedel in the last 18 months, and now has its sights set on building its paper, container and wood products businesses with the acquisition of Willamette.
"This is a strategic opportunity for us to grow the company and focus in a changing industry," said Weyerhaeuser Chairman and Chief Executive Steven Rogel. "Consolidation is going on rapidly, and size matters today like it never has before."
But Willamette's board has yet to respond to Weyerhaeuser's latest takeover offer. Rogel said in a letter released to the news media that he first proposed a merger to Willamette President and Chief Executive Duane C. McDougall two years ago.
Portland, Ore.-based Willamette's directors met Thursday to examine the offer, but "failed to act" on it, according to Weyerhaeuser.
On Monday, Willamette confirmed it had received the offer, and informed Weyerhaeuser it was reviewing the deal.
"Willamette is continuing to review the proposal and will respond in due course," it said in a brief statement.
On the New York Stock Exchange, Weyerhaeuser shares slipped $1.19 to close at $41.69, while Willamette shares rose $11.19 to close at $45.94.
Rogel said he was confident the company's offer would be accepted, uniting what he called "two peas in a pod" with strengths in the Pacific Northwest and Southeast.
The combination could save about $300 million annually in costs by the third year, with very few job losses, according to Weyerhaeuser.