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Georgia-Pacific Might Sell Unit

The company may shed its building-products distribution business to reduce debt and concentrate on consumer goods.

September 23, 2003|From Bloomberg News

Paper and lumber maker Georgia-Pacific Corp. said it might sell its building-products distribution unit to pay down debt and focus on its businesses that sell consumer goods including Dixie cups.

Georgia-Pacific hired Goldman Sachs & Co. to advise the company on options for the unit, which had $3.8 billion in sales last year. The company did not say what the unit might be worth.

A price of at least $1 billion would be consistent with Georgia-Pacific's plan to evolve into a consumer products company that competes with Kimberly-Clark Corp., analysts said. Chief Executive Pete Correll failed last year to spin off the larger and more profitable consumer-products businesses from the building-products units because of little investor support.

"This may be a situation where you have to find an external financial buyer," said Steven Chercover, an analyst at D.A. Davidson & Co. who has a "buy" rating on Georgia-Pacific stock and doesn't own it.

The lumber-distribution unit, the largest in the U.S., has shed more than 1,300 jobs and closed about 84 branches since restructuring in 1994. It employs 3,390 people and accounted for 16%, or $3.8 billion, of Georgia-Pacific's sales last year, providing lumber and other materials to home builders.

The company last year sold 60% of its Unisource Worldwide paper distribution business to investment company Bain Capital for $825 million to help cut its debt and focus on sales of tissue products including Brawny paper towels. Chercover said the lumber-distribution business might have to go a similar route since such rivals as Weyerhaeuser Co. and Boise Cascade Corp. already have distribution units.

"The main responsibility to shareholders here is to get a fair price," spokesman Greg Guest said.

The company has $11.4 billion in debt, mostly from the acquisitions of Unisource in 1999 and Fort James Corp. the following year.

About 8% of the distribution business' sales come from retailers such as Home Depot Inc. and Lowe's Cos., Guest said. Its main customers are home builders and building-material suppliers.

Georgia-Pacific shares fell 39 cents to $24.56 on the New York Stock Exchange. They have risen 62% in the last year.

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