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To: rrm_bcnu who wrote (1702)	11/13/2005 10:42:03 PM
From: jmhollen	Read Replies (1) \| Respond to of 8122

Georgia-Pacific ends frustration with public listing By Jeremy Grant in Washington and Andrew Ward in Atlanta Published: November 13 2005 23:14 \| Last updated: November 13 2005 23:14 Koch IndustriesGeorgia-Pacific’s frustration with life as a publicly-listed company was clear as early as March this year, when Pete Correll, chairman and chief executive for the past 12 years, expressed “shock” about the market’s treatment of the stock. “We believe there’s tremendous value potential in Georgia-Pacific, and [are] frustrated that the market hasn’t recognised it yet,” he told USA Today. The paper and building materials group has seen its share price hover around the $35 mark for the past year, despite Mr Correll’s success in strengthening the balance sheet and broadening its product portfolio. Mr Correll’s frustration with Wall Street came to an end on Sunday, when Georgia-Pacific accepted a $48-a-share offer from Koch Industries to take it private. The deal was hatched on a golf course in Wichita, Kansas – headquarters of Koch, the second largest privately held company in the US. Koch was already familiar to Mr Correll, having bought two pulp mills from Georgia-Pacific in January last year for $730m. After successive games of golf with Koch chief operating officer Joe Moeller, Mr Correll says he became convinced “that the value systems of these two companies were very much aligned”. It took a call in October from Charles Koch, chairman of Koch, suggesting the acquisition that led to Sunday’s agreement. Mr Correll says he will not miss the quarterly reporting and other pressures imposed on the management of publicly-listed companies. “The credibility of public company CEOs is at an all time low in this country and we’re all spending a lot of time trying to convince the world that we’re doing the right thing,” he said, in an interview with the FT on Sunday. Mr Correll is credited with reducing Georgia-Pacific’s reliance on commodity pulp and paper by expanding into less cyclical and higher- margin consumer products. The group generates about half of its profits from tissue products, such as restaurant napkins and paper towels, competing against consumer giants, such as Procter & Gamble and Kimberly-Clark. It also supplies building products, including lumber and gypsum, to home improvement retailers. The most important moment in Georgia-Pacific’s transformation came five years ago, when it bought Fort James Corp, a rival tissue producer, and spun off 4.7m acres of timberland and several pulp and paper mills. However, the group has been under pressure in recent months as rising commodity prices have increased costs and reduced demand for tissue products. Third-quarter net profits were down 40 per cent from the year before at $145m. Sales fell slightly to $4.71bn. Last month, the group announced plans to lay-off 1,100 of its 55,000-strong workforce in the US and Europe as part of efforts to reduce costs and match supply with demand. Koch’s businesses range from oil trading and refining to chemicals, asphalt, fertiliser, industrial resins. The portfolio even includes a ranching venture that employs cowboys. Ever since it was founded by Mr Koch’s father Fred in 1927 with a fleet of oil delivery trucks, Koch has grown to a sprawling industrial conglomerate with annual sales of $60bn. The Georgia-Pacific purchase could boost that to $80bn, company officials say. Charles and his brother David, two of four Koch brothers, work full time in the business and each owns 40 per cent of its shares. The rest is held by individuals with links to the Kochs. The two bought out their siblings Frederick and William in the early 1980s. William briefly made headlines in 1992 by sponsoring the winning yacht in that year’s America’s Cup. Under Mr Koch, 70, the company has made a virtue of its private ownership by re-investing 90 per cent of its profits back into the business. “That’s something that most public companies can’t do,” says Mr Moeller. It is a philosophy that drove Koch to make its first large acquisition, of DuPont’s Invista lycra and textiles business, for $4.2bn in cash last year. “By being private, we’ve been willing to take the tough decisions. We absorb volatility. And this is very important,” Mr Koch said in a rare interview with the FT in 2003. Mr Moeller says Koch’s interest in Georgia Pacific grew out of its purchase of the two pulp mills. “We believe that they have many competitively advantaged assets,” he says, pointing to the company’s forestry-related consumer goods businesses that include Dixie paper cups and Vanity Fair quilted paper. The acquisition will also propel Koch much deeper into managing some of the world’s biggest consumer brands. Mr Moeller says: “We’ve been very pleased with what we’ve been able to accomplish with Invista and we’re excited with what we see in the Georgia Pacific brands.” news.ft.com .