Local factory gets new owner

Published 12:00 am Friday, November 18, 2005

PENNINGTON-A major change has come to the region as Koch Industries Inc. agreed to buyout Georgia Pacific Corp. for 13.2 billion, including the companies Pennington paper mill.

The Board of Directors of Georgia-Pacific unanimously determined Thursday that the offer and the merger are fair to and in the best interests of Georgia-Pacific and its shareholders. The board approved, adopted and declared advisable the merger agreement and the transactions contemplated by the merger agreement, including the offer, and recommended that holders of shares of Georgia-Pacific common stock accept the offer and tender their shares in the offer.

In a statement Thursday, Charles G. Koch, chairman and chief executive officer of Koch Industries, Inc. said the merger created lots of possibilities.

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“Georgia-Pacific is an outstanding company with highly talented employees, a heritage of leadership in the marketplace and strong branded products,” Koch said. “By joining our group of privately held companies, Georgia-Pacific will be able to maintain a long-term focus on growth and a commitment to delivering value for all of its constituents.”

The company planned to show their long-term commitment, Koch said, by continuing to reinvest in the company.

“As a wholly owned Koch subsidiary, it will benefit from our historical practice of reinvesting up to 90 percent of earnings in our businesses,” Koch said. “We have extensive experience with cyclical, highly competitive businesses and the ability to commit appropriate resources to enhance the company’s assets and pursue a growth agenda.”

Koch’s Joe W. Moeller, president and chief operating officer, said they see a great deal of potential from the purchase.

“We view this major acquisition not only as a key strategic investment for Koch but as a platform for future growth,” Moeller said. “We believe this transaction represents a unique opportunity in which each of our enterprises and employees will be able to prosper together.”

In the buyout, Koch will pay $48 for each Georgia Pacific share, or 39 percent more than the stock’s $34.65 closing price on Nov. 11, the companies said in a joint statement. The transaction will be the biggest ever for the Wichita, Kan. Based company.

There is no financing condition to the tender offer

Unless the tender offer is extended, the tender offer and any withdrawal rights to which Georgia-Pacific’s shareholders may be entitled will expire at midnight, Eastern time, on Thursday, Dec. 15, 2005.

Following the acceptance for payment of shares in the tender offer, Koch Forest Products will be merged into Georgia-Pacific, with Georgia-Pacific surviving the merger as a privately held, indirect wholly-owned subsidiary of Koch Industries.

Any Georgia-Pacific shareholders who have not sold their shares in the tender offer will have certain dissenters’ rights with respect to the merger under the applicable provisions of the Georgia Business Corporation Code, if those rights are perfected.

The merger is huge for the Pennington mill and the company as a whole. Georgia-Pacific chairman and chief executive officer. A.D. “Pete” Correll, said this was the most dramatic transaction in Georgia Pacific’s history, but felt it was a positive step.

“We are pleased it offers very significant, incremental value to our shareholders, as is warranted by our company’s tremendous assets and talented employees,” Correll said “Koch’s acquisition of Georgia-Pacific will enable us to move into the future in an exciting fashion and continue achieving our financial and operating goals with committed new ownership that is exceptionally strong financially, has a long history of outstanding business success, and a dedication to operational excellence.”

Georgia Pacific spokeswoman Robin Keegan Keegan said as a unit of Koch, Georgia Pacific will be able to focus on long-term profit growth rather than quarterly results.

“It’s more difficult to make long-term investments sometimes when you’re operating as a publicly held company,” Keegan said. “You can weather business cycles better and make decisions better to optimize long-term profits.”

Koch has an annual revenue of more than $60 billion, compared with $19.6 billion at Georgia Pacific. Combined, Koch will pass Cargill Inc., which had sales of $71.1 billion in sales through June as the biggest privately owned company in the U.S.

The sale came as a result of Georgia Pacific being hurt by asbestos-related legal settlements, falling lumber prices and rising energy costs. The company had a debt of $7.8 billion, and $13.2 billion in stocks for a total $21 billion buyout.

Koch acquired Georgia-Pacific’s non-integrated market and fluff pulp operations at New Augusta, Miss., and Brunswick, Ga., in May 2004. Since the purchase, Koch has invested in these businesses, which have been operating as Koch Cellulose. Upon completion of this transaction, these operations will be reintegrated with Georgia-Pacific businesses.

Seeing this growth, Correll said, gave them utmost confidence in Koch’s abilities.

“Through the experience we gained in our recent transaction with Koch, we are very familiar with Koch’s outstanding strategic asset management approach and capabilities,” Correll said. “It is gratifying that the same highly effective leadership team we dealt with earlier took a focused interest in all of Georgia-Pacific and in our continuing success story as an industry leader. We are confident that this combination will be a winner, bringing superior strengths, shared core values and readiness to compete in all of our markets.”