Boise Cascade Quits Forest Industry, Will Focus on Office Supplies
By Nell Henderson
Washington Post Staff Writer
Tuesday, July 27, 2004; Page E01
Boise Cascade Corp., a major force in the U.S. forest products industry with deep roots in the development of the Pacific Northwest, announced yesterday it is getting out of the lumber and paper business and instead will focus on selling office supplies through its OfficeMax retail chain.
The company said it has agreed to sell most of its timberland, forest products, paper mills and other related assets for about $3.7 billion to a new, privately held company formed by Madison Dearborn Partners LLC, a private investment firm based in Chicago.
The company plans to change its name to OfficeMax Inc. and will move its headquarters to Itasca, Ill., home of its office products division. The company is headquartered in Boise, Idaho, where it has been a prominent corporate presence since its founders won the right to tens of thousands of acres of public land originally granted to the Northern Pacific Railroad.
The transformation from ailing manufacturer to retailer was envisioned by many paper industry analysts a year ago when Boise announced it was acquiring OfficeMax, the nation's third-largest office supplies retail chain, ranking behind Staples Inc. and Office Depot Inc.
It marks the second time in a week that one of corporate America's household names has shifted away from its core business as the economy's traditional industrial base recreates itself in a more competitive, global environment. Last Thursday, AT&T, beset by competitors in an industry it virtually created, announced it would no longer market long-distance service to households.
Boise's asset sale makes sense because it has been a "below-average player" in the tough, slow-growth timber and paper industry, which has undergone substantial consolidation in recent years, said Mark Wilde, who follows the company as a managing director of Deutsche Bank.
One-time industry giant Georgia-Pacific Corp. underwent a similar metamorphosis in recent years, spinning off its timberlands and focusing on consumer products such as paper towels, toilet paper and paper cups.
Madison Dearborn, by contrast, has made money by buying similar paper mills and timberland from other companies, liquidating some assets and managing the remainder better than their former owners, Wilde said.
As purely financial investors, he said, Madison Dearborn is willing to consider options that traditional paper companies -- many of them family-owned -- are unwilling to consider, such as selling valuable timberland.
Among the Boise Cascade assets being shed are its 22 wood products facilities in the United States, Canada and Brazil; 27 wholesale distribution centers; five pulp and paper mills, five corrugated container plants and ownership or control of more than 2.3 million acres of timber.
Madison Dearborn "will probably clean it up and sell the pieces," Wilde said.
To buy the assets, Madison Dearborn has formed a company called Boise Cascade LLC, which will be based in Boise. It will be run by W. Thomas Stephens, former president of MacMillan Bloedel Ltd., a Canadian forest products company.
That will leave the new OfficeMax to concentrate on selling office furniture, electronics, paper and other supplies to consumers through its nearly 1,000 retail stores and to businesses through its catalog and Internet operations.
Boise Cascade ranked 248th on Fortune Magazine's list of the 500 biggest publicly owned companies last year, with profit of $8.3 million on revenue of $8.2 billion.
© 2004 The Washington Post Company