NEW YORK — Fort Howard Corp., one of the larger U.S. paper products companies, said Monday that it signed an agreement to take the firm private in a management-led leveraged buyout valued at about $3.57 billion.
There has been speculation that the Green Bay, Wis.-based firm wants to ward off a hostile takeover. Fort Howard stock rose $4.50 on news of the agreement to close at $53.875 in trading on the New York Stock Exchange.
Some analysts said the stock price could go even higher, particularly if a third party emerges.
Paper industry analyst James Wei of Tucker Anthony and R. L. Day said: "If a bidding war emerges, the stock could easily be traded as high as $60 a share." He said that within the past year the company's stock traded as high as $62 with no takeover speculation built into the price.
Fort Howard said Monday that it would entertain inquiries from other parties possibly interested in acquiring the firm.
The agreement calls for a cash tender offer of $53 a share by FH Acquisition Corp., a new company formed by a group of Fort Howard managers led by Chairman and CEO Paul J. Schierl and a unit of Morgan Stanley Group Inc.
Fort Howard leads the U.S. market in disposable food and beverage containers, with a market share of about 31%, said paper industry analyst Guy Nielsen of Brown Bros. Harriman in New York.
May Begin July 1
The pact with FH Acquisition, formed by the management group and the Morgan Stanley Leveraged Equity Fund II LP, calls for a tender offer for all outstanding Fort Howard shares to begin July 1.
The current buyout offer is subject to the tender of a majority of Fort Howard's common stock. Upon completion of the merger, holders of shares not purchased in the tender offer will also receive $53 in cash, the firm said.
Fort Howard said the decision was unanimously recommended by a special committee of Fort Howard's outside directors.
It said Morgan Stanley Leveraged Equity Fund and Morgan Stanley Group Inc. have given commitments to provide $1.53 billion in bridge financing and equity to FH Acquisition Corp. The company expects to repay the loan through a public or private offering of long-term debt.
Bankers Trust Co. of New York will lead a syndicate of banks to provide up to $2.55 billion in senior financing, of which Bankers Trust will provide $500 million.
Fort Howard had net earnings of $157.7 million on sales of $1.8 billion for the year ending Dec. 31.