Temple-Inland to divest non-manufacturing businesses
Feb. 26, 2007 - Temple-Inland Inc. announced today that its Board of
Directors has approved a transformation plan to unlock shareholder
value through the separation of Temple-Inland into three focused,
stand-alone, public companies and the sale of its strategic
The plan includes:
- Retaining its manufacturing operations - corrugated packaging
and building products
- Spinning off its financial services operation
- Spinning off its real estate operation
- Selling its strategic timberland
The Board and management of Temple-Inland are committed to
maximizing value for shareholders.
Creating Long-Term Opportunities and Realizing Value
"We have constantly maintained a focus on maximizing shareholder
value and over the years have evaluated a long list of strategic
alternatives, including all of the elements of the transformation plan
announced today. Taking advantage of current market conditions, this
transformation plan will unlock shareholder value in a very tax
efficient manner and provide our shareholders ownership in three
outstanding businesses. Each of the three public companies -
manufacturing, financial services and real estate - will be well
positioned in the marketplace, have an appropriate capital structure
and will benefit from greater strategic focus," said Kenneth M.
Jastrow, II, chairman and chief executive officer.
"We have made great progress at Temple-Inland," said Mr. Jastrow.
"Over the past five years, we have generated total shareholder return
of 107%, compared with 39% for the S&P 500 and a negative 5% for our
peer group median. We have returned $710 million to shareholders over
the past two years through share repurchases and dividends and have
increased the dividend each of the past five years. Despite this
progress, we are implementing this bold plan to transform our Company
in order to unlock shareholder value and provide a platform to
continue to provide shareholders with superior long-term returns. We
are very excited about the future."
Three Ongoing Businesses
Temple-Inland - Corrugated Packaging and Building Products
Upon completion of the transformation plan, Temple-Inland will be
a low-cost, highly efficient manufacturing company focused on
corrugated packaging and building products. Corrugated Packaging
operating income has improved more than 1,000% since 2003 and our
building products operation has achieved record earnings each of the
past three years.
"Our corrugated packaging operation has made significant progress,
driven by execution of strategic initiatives, focusing on full
integration and increasing asset utilization. Since 2003, we have
generated $225 million in business improvement, and we expect to
generate an additional $75 million by focusing on manufacturing
excellence within our box plant system and further operational
efficiency in our containerboard mills," said Mr. Jastrow.
"Our building products operation manufactures a diverse line of
products for new home construction, commercial, and repair and
remodeling markets. Our facilities are state-of-the-art, low-cost and
well-located to serve areas of the country projected to experience the
highest rate of demand growth."
Corrugated packaging operation includes:
- 5 linerboard mills 3.2 million tons
- 1 corrugating medium mill 0.3 million tons
- 64 converting facilities 3.7 million tons of production
Building products operation includes:
- 5 lumber mills 1,070 mmbf
- 4 gypsum wallboard plants 2,100 mmsf
- 5 particleboard plants 880 mmsf
- 1 fiberboard plant 460 mmsf
- 2 medium density fiberboard plants 300 mmsf
"Going forward, Temple-Inland will be a focused, leading
manufacturing company positioned to continue to drive return on
investment (ROI) through increasing asset utilization, lowering
operating costs and improving efficiency. We will also continue to be
a market-driven, customer-oriented company. We are confident the new
Temple-Inland is well positioned for the future," concluded Mr.
"Financial Services achieved record earnings in 2006 of $222
million, a record for the third consecutive year. Over the past ten
years, Financial Services has earned $1.8 billion and averaged a 20%
ROI. Guaranty Bank has consistently grown its deposit base by focusing
on customers who value high-touch, high-service. The Bank's branch
network is located in Texas and California, the largest and most
rapidly growing deposit markets in the U.S. Guaranty is a national
lender, with single-family mortgages in every state and a wide range
of loan products targeted in over 30 markets nationwide. Financial
Services is ideally positioned to continue to serve its targeted
customers and has a solid foundation for growth and continued strong
financial performance," said Mr. Jastrow.
Guaranty Bank is a federally-chartered stock savings bank that
provides consumer and commercial banking activities through 100
banking centers in Texas and 53 in California, and lends nationally in
diverse geographic markets. The Texas banking centers are concentrated
in the metropolitan areas of Houston, Dallas/Fort Worth, San Antonio,
and Austin, as well as the central and eastern regions of the state.
The California banking centers are concentrated in Southern California
and the Central Valley. In addition, Guaranty's insurance operation is
the 30th largest in the U.S. with offices in Texas and California, and
provides a wide range of insurance products and risk management
services to its customers.
Real Estate ("Forestar")
"Our real estate activities include over 236,000 acres, 85
projects in eight states and twelve markets. Our strategy for real
estate is value creation. We have currently identified over 215,000
acres of high-value land located in growth corridors, thus providing
the opportunity to create value through entitlement and real estate
development. Securing entitlements creates the largest proportional
increase in value and in 2006, we entitled five projects totaling
2,181 acres and began the entitlement process on another 4,890 acres.
The most significant concentration of our real estate holdings is
around Atlanta, Georgia with over 205,000 acres of real estate
property. Atlanta is the largest homebuilding market in the U.S., and
over time its projected growth will create significant real estate
development opportunities. We believe there is substantial opportunity
to accelerate the creation of shareholder value by operating this
business as an independent public company," said Mr. Jastrow.
The real estate business, which operates under the name Forestar
Real Estate Group, is focused on real estate investment and
development activities which include single-family residential,
commercial, mixed use and multi-family housing projects.
"Our strategic timberland is located in some of the best fiber
demand markets in the U.S. and represents a very valuable resource
base. Fiber growth on our timberland is accelerating, and we expect
fiber growth to increase 50% over the next ten years and double over
the next 30 years. The mix of sawtimber versus pulpwood is also
expected to increase," said Mr. Jastrow.
Our timber holdings consist of approximately 1.8 million acres of
timberland located in Texas, Louisiana, Alabama and Georgia. In
connection with our timber holdings, we also own mineral rights on
388,000 acres in Texas and Louisiana and 351,000 acres in Alabama and
As part of the transformation plan, we anticipate consummating
appropriate fiber supply agreements and transferring approximately
100,000 acres of our strategic timberland into Forestar Real Estate
The sales process for the Company's strategic timberland is
expected to begin immediately. The majority of proceeds from the sale
will be returned to shareholders. A portion of the proceeds will be
used to establish appropriate capital structures for each of the
ongoing stand-alone businesses to ensure financial flexibility for
shareholder value creation in the future. The proposed separations of
Financial Services and Real Estate are intended to be tax-free
distributions to shareholders. Until the separations of Financial
Services and Real Estate are completed, the Company expects to
continue to pay a quarterly dividend of $0.28 per share.
Final terms of the proposed separations and sale have not yet been
determined and will be announced at a later date. Completion of the
proposed separations is subject to approval of the final terms by
Temple-Inland's Board of Directors; favorable rulings from the
Internal Revenue Service, and/or favorable opinions of tax counsel;
and the filing and effectiveness of registration statements with the
Securities and Exchange Commission with respect to the common stock of
each of the spun-off entities, and other approvals. The transformation
plan is anticipated to be completed by calendar year-end.
We believe that this transformation plan is the best course of
action for all our stakeholders; however, as we continue to evaluate
the plan, the Company retains the flexibility to consider alternative
strategic transactions to maximize shareholder value.
The Company has engaged Goldman, Sachs & Co. and Citigroup Global
Markets Inc. as its financial advisors and Skadden, Arps, Slate,
Meagher & Flom as its Legal Counsel.
"The employees of Temple-Inland have created a great company and
significant value for shareholders. Their continued focus "to be the
best" has driven our Company's performance to record levels. On behalf
of the Board, we sincerely thank each of our employees for their
dedication and hard work. We also have extremely strong management for
each of our businesses. Our depth of management and our great
employees make us confident in the success of this transformation plan
and the future for each of our businesses."
"Finally, we value and greatly appreciate our relationship with
customers and their long-term ongoing support. Our focus will be on
continuing to exceed their expectations."
"We are convinced that this transformation plan is the best course
of action for all our stakeholders," concluded Mr. Jastrow.
The Company will host a conference call at 11:00 a.m. ET on
February 26, 2007 to discuss the transformation plan. The meeting may
be accessed through web cast or by conference call. The web cast may
be accessed through Temple-Inland's Internet site at
www.templeinland.com. To access the conference call, listeners calling
from North America should dial 1-800-901-5213 at least 15 minutes
prior to the start of the meeting. Those wishing to access the call
from outside North America should dial 1-617-786-2962. The password is
Temple-Inland. Replays of the call will be available for two weeks
following the completion of the live call and can be accessed at
1-888-286-8010 in North America and at 1-617-801-6888 outside North
America. The password for the replay is 89029753.
Temple-Inland Inc. operates four business segments: corrugated
packaging, forest products, real estate and financial services. The
Company's 1.8 million acres of forestland are certified as managed in
compliance with ISO 14001 and in accordance with the Sustainable
Forestry Initiative® (SFI) Standard of the Sustainable Forestry
Board to ensure forest management is conducted in a scientifically
sound and environmentally sensitive manner.
SOURCE: Temple-Inland Inc.