International Paper, the world's largest paper company, agreed Monday to acquire Hammermill Paper for $1.08 billion, thus rescuing Hammermill from the unwanted grasp of California investor Paul A. Bilzerian.
Hammermill, an Erie, Pa.-based maker of fine writing paper, accepted International Paper's offer of $64.50 per share after rejecting a $52-a-share bid from a group led by Bilzerian. The deal marks the third time in the last 18 months that Bilzerian has failed in a takeover attempt.
The Bilzerian group, which owns 19.6% of Hammermill's 16.7 million common shares outstanding, had said last week that it might be prepared to pay $57 a share or more if it could review Hammermill's financial data and found the company to be in good health.
But W. Craig McClelland, Hammermill's president and chief executive, decided that a merger with International Paper would best serve the interests of Hammermill and its workers.
"The combined entity will benefit from the two companies' complementary management skills, products and geographic locations," McClelland said in a joint statement with John A. Georges, chairman and chief executive of International Paper.
In trading Monday on the New York Stock Exchange, International Paper shares closed at $64, down 87 1/2 cents. Hammermill also closed at $64, up $5 from Friday.
Bilzerian declined to comment Monday. However, he and his partners apparently won't go away empty-handed.
Mark S. Rogers, an analyst at Prudential-Bache Securities in New York, estimates that the group stands to make more than $25 million on its investment in Hammermill stock.
"He's going to cry all the way to the bank," quipped George Adler, a paper industry analyst at Smith Barney, Harris Upham & Co.
Other Failed Attempts
Yet one Wall Street analyst speculated that Bilzerian, a little-known Sacramento-based investor, took his latest defeat hard. The analyst noted that Bilzerian, who earlier this month had eagerly returned phone calls while crisscrossing the country, had become uncharacteristically quiet in the aftermath of his third unsuccessful takeover attempt.
In 1985, he was squeezed out of an attempted takeover of H. H. Robertson Co., a Pittsburgh construction company. Later that year, he failed in a highly publicized bid to take over Cluett, Peabody & Co., a New York apparel maker.
In agreeing to buy Hammermill, New York-based International Paper will be taking on substantial debt at a time when the paper industry is just beginning to get back on its feet after the strong dollar devastated paper exports.
Moody's Investors Service, for example, said Monday that it has placed the debt ratings of International Paper under review for possible downgrade in the wake of the Hammermill deal.
But analysts say International Paper, which had 1985 sales of more than $4.5 billion, has the resources to shoulder the additional debt.
The company, which controls 6.8 million acres of timberland and produces paper, packaging goods, pulp and other wood products, should benefit along with other paper producers as sales recover from the dollar's weakening against most major foreign currencies.
INTERNATIONAL PAPER AT A GLANCE
World's largest maker of paper products. Also a major manufacturer of packaging materials, pulp and wood products. Controls 6.8 million acres of
Year ended Dec. 31
(in millions): 1985 1984 1983 Sales $4,502 $4,716 $4,357 Net income 106 219.8 211.6
Assets: $1.1 billion
Shares outstanding: 48.1 million
12 mo. price range (NYSE): $44.25 -- $68.50
Monday's close: $64.00, down 87 1/2 cents
HAMMERMILL AT A GLANCE
Largest producer of fine writing papers in the United States. Also makes printing papers and industrial and packaging papers. Owns or controls 440,000 acres of timberland.
Year ended Dec. 31
(in millions): 1985 1984 1983 Sales $1,877 $1,855 $1,623 Net income 37.9 55.9 32.6
Assets: $337.8 million
Shares outstanding: 16.13 million
12 mo. price range (NYSE): $33.00 -- $64.00
Monday's close: $64.00, up $5.00