The Wauna mill will soon have yet another owner.
Koch Industries Inc. announced it is buying paper products giant Georgia Pacific Corp. for $13.2 billion, which will make it the largest private company in the nation. Georgia-Pacific has owned the pulp and paper mill east of Clatskanie since 2000, and with more than 1,100 workers and an $86 million payroll is Clatsop County's largest employer.
The cash deal announced Sunday would marry the maker of Brawny paper towels, Dixie plastic cutlery and Quilted Northern bath tissue with a diversified commodities conglomerate that has nearly three times its annual revenue.
The deal has received approval from both companies' boards, and calls for Koch to assume $7.8 billion in debt from Atlanta-based Georgia-Pacific, which will become a wholly owned subsidiary of Koch. The Koch unit formally acquiring GP plans a cash tender offer this week for Georgia-Pacific, at $48 per share, or about 38.5 percent above their closing price Friday.
It was not known this morning whether the purchase would affect employment or the operations of any particular plant, said Carolyn McGreevy, a spokeswoman based in Camas, Wash. It would be a while before managers know what would happen to individual mills. But she said Sunday that Koch has a history of investing in its businesses for the long term.
"Koch Industries purchased some pulp and paper facilities from Georgia-Pacific a few years ago and apparently liked what they saw," McGreevy said. "They know how to be in this business. We know it's a positive step."
In mid-September, Wauna mill employees with the United Steelworkers Local 1097 had agreed, by a narrow margin, to a four-year contract extension with the company. The purchase by Koch shouldn't change things for union members, said Rick Erickson, president of the local USW. He said that the four-year agreement states any company that buys Georgia-Pacific must honor the contract.
"As far as we can see at this point, it's going to be business as usual," Erickson said. "This is the fifth time we've been bought and sold, and so this is nothing new for the union to go through."
In October, Georgia-Pacific announced that it would cut operating costs companywide during the next two years by $100 million annually, and the Wauna mill would drop 28 jobs by attrition.
Koch, based in Wichita, Kan., operates refineries and pipelines, trades commodities and manufactures pulp, paper and fibers. With Georgia-Pacific, it will have annual revenue of some $80 billion, helping Koch surpass food and farm products maker Cargill Inc. as the largest privately held company in the U.S. Koch employs more than 30,000 people.
Besides consumer paper products, Georgia-Pacific also makes building products such as plywood, lumber and gypsum wallboard.
The Wauna mill focuses on the consumer tissue products, like Quilted Northern toilet paper, Vanity Fair napkins and all the Brawny paper towels sold west of the Rockies. In 2004, the company started up the No. 6 Paper Machine, a $200 million investment that created 110 new jobs.
The mill has changed hands multiple times in the last half century. In 1962, Crown Zellerbach bought the land from the defunct Wauna Lumber Co., and after spending $120 million to construct the mill started churning out products in 1965. In 1986, the mill was bought by the James River Corp., which then merged with the Fort Howard Corp. in 1997 and became Fort James. Georgia-Pacific took over three years later.
The deal between Georgia-Pacific and Koch marks the first significant foray into consumer products for Koch, which traces its history to 1927 when Fred C. Koch developed a new method to refine crude oil. Its interests today are a full array of commodities-related activities: ranching to fertilizer to petroleum processing, carpets and asphalt.
Chairman and CEO Charles G. Koch and his brother, David, a company board member and executive vice president, are both worth $4 billion, according to Forbes ranking of the world's wealthiest people.
The proposed acquisition would be the largest in Koch's history, coming about 18 months after it acquired Invista BV, a nylon fibers business that makes Lycra and Stainmaster, from DuPont Co.
Koch acquired two pulp mills in New Augusta, Miss., and Brunswick, Ga., from Georgia Pacific in May 2004, a deal which executives of both companies said Sunday prompted ongoing discussions.
"From the investment we made in Koch Cellulose, that really got us very interested in the entire forest products sector," Joe W. Moeller, Koch's president and chief operating officer, said in a telephone interview. "We see this really as a natural extension for our company and a great platform for growth."
Georgia Pacific CEO A.D. "Pete" Correll, who faced a mandatory retirement when he turns 65 next April, is expected to join Koch's board and help with the transition. Koch plans to name a new CEO and president of Georgia-Pacific.
In a telephone interview, Correll said talks on the current deal began in earnest last month and that operating as a private company will allow Georgia-Pacific to invest in areas - particularly its packaging and building products businesses - where it has not previously because of concerns Wall Street would not approve.
Had it undertaken such investments, "we feel that the prospects are very high that our share price would go down," Correll said. Operating as a private company also will allow Georgia-Pacific managers to "avoid the distraction of quarterly reports," better weather the industry's cyclical downturns and execute strategic decisions much faster, Correll said.
Correll joked that he also won't miss quarterly earnings conference calls with analysts, mandatory reporting requirements under the federal Sarbanes-Oxley corporate reform law "and 47 other" regulatory chores.
Among Georgia-Pacific's debts are asbestos liability claims that remain to be resolved. The company manufactured gypsum board products until 1977, and has had hundreds of thousands of claims filed against it over exposure to asbestos fibers, which are carcinogenic.
Georgia-Pacific paid about $200 million last year in asbestos liability claims, but says the number of claims has shrunk dramatically from 26,500 in 2004 to fewer than 8,000 so far this year. Koch will handle those liabilities in a similar fashion, Moeller said.
The Oregonian contributed to this report