Potlatch Mulls Spin-Off of Pulp-Based Businesses
April 17, 2008 - Potlatch today announced that its Board of Directors has authorized management to evaluate a potential tax-free spin-off of the Company’s pulp-based businesses.
According to Potlatch, a spin-off, if pursued, would create two stand-alone, publicly traded entities: a timber REIT, which is a verified forest practices leader with 1.65 million acres of forestland in Arkansas, Idaho, Minnesota and Wisconsin; and a pulp-based manufacturing company that would include Potlatch’s Consumer Products facilities in Lewiston, Idaho, Las Vegas, Nevada, and Elwood, Illinois, and its Pulp & Paperboard facilities in Lewiston, Idaho, and Cypress Bend, Arkansas.
The businesses to be evaluated for spin-off had revenues of approximately $1.2 billion in 2007, the company said.
“If pursued, a spin-off would provide shareholders with direct ownership in two public companies, each uniquely focused on different businesses," said Michael Covey, Potlatch's chairman, president and CEO. "One would be essentially a pure-play timber REIT and the other would be an independent, solidly positioned pulp-based manufacturing company, consisting of our Consumer Products and Pulp & Paperboard segments, businesses which continue to generate historically strong operational results. We are excited about the prospect of evaluating this potential opportunity for shareholders, customers and employees and intend to move as expeditiously as possible. We are confident that this is the right time to seriously consider this strategic move.
“If the Board decides to pursue the spin-off of our pulp-based businesses, it would, among other things, enable management to focus more intently on Potlatch’s core Timber and Real Estate businesses to drive more predictable cash flows, limit volatility from future earnings and deliver long-term growth. At the same time, the spin-off company would be able to increase focus on managing and growing its manufacturing businesses without the restrictions imposed under REIT rules,” Covey added.
The Wood Products business, which would be retained by Potlatch in a spin-off, would consist of four sawmills in Idaho, Arkansas, Minnesota and Michigan, and one industrial-grade plywood mill and one particleboard mill in Idaho. Potlatch’s Lewiston, Idaho, Wood Products Facility, which shares a common site with the Lewiston pulp-based facilities, would be included in the businesses to be spun off as a separate public company.
Potlatch said, in any event, its headquarters will remain in Spokane, Washington, and Covey will remain chairman, president and CEO of Potlatch.
As part of its evaluation process, Potlatch has retained Russell Reynolds Associates, an executive search firm, which will assist in an external search for a CEO for the proposed pulp-based manufacturing company.
The company said any transaction would likely be completed during the fourth quarter of 2008.
SOURCE: Potlatch Corp.