September 17, 2010 in Business

Clearwater Paper buying Georgia-based rival

By The Spokesman-Review

Clearwater Paper Corp. will buy Georgia-based competitor Cellu Tissue Holdings Inc. for $502 million, the two companies announced Thursday.

Spokane-based Clearwater will pay Cellu Tissue stockholders $12 per share, and assume $255 million in debt, in a deal a Clearwater statement said should increase earnings immediately.

Combined revenues are projected to be $1.9 billion.

Cellu Tissue operates 10 paper-making or conversion plants in the United States from its headquarters in Alpharetta, Ga. Many make private-label tissue products like those manufactured by Clearwater, but others make coated-paper products.

Another plant makes foam plates and similar products.

Clearwater Chairman Gordon Jones noted the acquisition of Cellu Tissue augments the company’s efforts to increase manufacturing capacity, notably the June announcement Clearwater will build a new tissue machine and associated production capacity in North Carolina.

“This acquisition gives us a rare opportunity to immediately have a national manufacturing presence to increase service to our existing private label grocery customers and expand into new private label channels,” he said.

Cellu Tissue stock jumped 50 percent on the news, closing at $11.87 on extremely heavy volume of more than 15 million shares. Clearwater shares traded down $1.01 to $71.82, off less than 2 percent.

After the deal was announced, two law firms said they are investigating the Cellu Tissue board of directors for possible breach of fiduciary duty because they accepted a price below the $16 per share one analyst said was more appropriate.

Weston Presidio, an investment firm, and Cellu Tissue Chief Executive Officer Russell Taylor, who together own 56 percent of company shares, have agreed to vote their stock for the transaction.

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