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The pitched battle between Federal Way, Wash.-based paper giant Weyerhaeuser Co. and its smaller Portland, Ore.-based rival Willamette Industries took a litigious turn Tuesday. Willamette’s board unanimously recommended that shareholders reject Weyerhaeuser’s $48 per share offer, with few signs of softening its stance. Weyerhaeuser expressed disappointment at the board’s decision and revealed that it had commenced litigation in Oregon Circuit Court against Willamette for failing to hand over lists of its shareholders. Under Oregon law, Weyerhaeuser, as the owner of 1,000 Willamette shares, has the right to the company’s most up-to-date record of shareholders, a Weyerhaeuser spokesman said. “We have a legal right to review the things that we have stipulated in the press release,” he said. A Willamette press officer responded that Weyerhaeuser’s lawsuit is without merit, and that Willamette has complied with all laws governing the matter, including Oregon statutes. “We believe the Weyerhaeuser lawsuit is without merit. We have provided them with all the shareholder information required by Oregon statute — including shareholder lists. Our shareholders have already received mailings from Weyerhaeuser,” the Willamette press official said. Since Weyerhaeuser would need to rally 80 percent of Willamette’s shareholders to remove its staggered board — and then its poison-pill provision — a full record of share ownership may be the key to winning a proxy battle. Both Willamette and Weyerhaeuser have hired proxy solicitors (MacKenzie Partners and Innisfree M&A, Inc., respectively) to find up-to-the-minute information on who holds Willamette’s shares. Weyerhaeuser’s lawsuit, therefore, may be aimed at sending a message to Willamette shareholders exposing management’s unreasonable intransigence. “Generally it’s not going to uncover a lot of information that’s useful, but it can’t hurt to have it,” said Brian Hoffmann, partner at Cadwalader, Wickersham & Taft. “Under tender offer rules, the target has an obligation to provide a security listing to the bidder or to mail the tender offer to its shareholders directly.” “At this point, it’s the same as a proxy fight,” a banker noted. “At the end of the day the jury will be the shareholders.” Both sides seem to have hardened their positions. Willamette chief executive officer Duane McDougall repeated that “Willamette is not for sale” — management’s battle cry since Weyerhaeuser unveiled its hostile offer in mid-November. Weyerhaeuser chafed at Willamette’s revelation in an announcement last week that its unwanted suitor had estimated synergies between the two companies at between $330 million and $645 million in a meeting between the management of the two companies two years ago. Those numbers are higher than Weyerhaeuser’s current estimate of $300 million, which Weyerhaeuser calls “realistic and achievable.” “If Willamette’s management believes there are greater synergies inherent in the proposed transaction, rather than confuse shareholders with irrelevant numbers, they should discuss with us what is real,” Weyerhaeuser noted in a press release. Analysts had predicted the two companies would put aside their historical rivalry and negotiate a friendly deal. But the traditional competition between the two got worse three years ago when Willamette president Steven Rogel left to take the top spot at Weyerhaeuser. Copyright (c)2000 TDD, LLC. All rights reserved.

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