6309 Monarch Park Place, Suite 203
Niwot, CO 80503, USA
Phone (303) 443-5060
Toll free (888) 742-5060
Distinct from the company's building products manufacturing segment, Georgia-Pacific's building products distribution business is the top distributor in revenues of building products in the U.S. The distribution division's 2003 net sales were $4.3 billion.
Georgia-Pacific expects the transaction to result in net after-tax proceeds of approximately $780 million, which will be used to reduce debt. Actual cash proceeds could be larger or smaller depending upon working capital levels in the business at closing. The company expects to record an after-tax gain on the sale of approximately $20 million in the second quarter.
In addition, Georgia-Pacific will enter into a five-year agreement for the distribution business to continue purchasing structural panels, lumber and other building products manufactured by Georgia-Pacific. This agreement contains substantially similar terms as the current arrangement between Georgia-Pacific's building products manufacturing and building products distribution businesses.
The business employs approximately 3,400 people and operates 63 U.S.-based warehouses, plus one location in Canada, from which it distributes more than 10,000 products across 14 categories, including structural panels, hardwood plywood, roofing, insulation, metal products, lumber, paneling, vinyl siding and particleboard. These products are shipped via a fleet of 900 trucks, one of the nation's largest such fleets.
All current employees of the distribution business, including the current management team led by Charles McElrea, president - building products distribution, are expected to join the new company. Closing, which is expected to occur during the second quarter, is subject to customary conditions. Completion of the transaction is not subject to financing.
Georgia-Pacific reported $20.3 billion in revenues for 2003. Its building products distribution business had sales of $4.3 billion and operating profits of $98 million. Its building products manufacturing had sales of $5.8 billion and profits of $379 million.
The company had considered splitting into two entities a few years ago. Its 1999 acquisition of Unisource Worldwide was a disaster as the numbers went south for the largest independent paper distributor in the U.S. Georgia-Pacific retains a 40% equity interest in Unisource, but recorded a $512-million loss in 2002 as a result of the sale. It reported a 2003 fourth-quarter loss from its Unisource investment of $4 million. Revenues for paper distribution were $4.7 billion in 2002. The company is pegging its future on its consumer products and packaging businesses.
'This agreement is yet another major step forward in reducing debt and sharpening the focus of Georgia-Pacific,' said A.D. 'Pete' Correll, Georgia-Pacific chairman and chief executive officer. 'We believe this transaction represents a fair valuation of the distribution business, is consistent with our strategy and is in our shareholders' long-term interest.'
'The building products distribution business has been a cornerstone of Georgia-Pacific for decades and these outstanding employees have built a truly world-class organization,' said David J. Paterson, executive vice president and president - building products. 'This new building products distribution company and our building products manufacturing business will each independently focus on their core strengths and strategies while maintaining a strong customer-supplier relationship.
'The distribution business' separation from Georgia-Pacific will be an opportunity for it to grow and excel, while our building products manufacturing business will continue to focus on differentiating its products through branding and innovation,' Paterson added. 'In addition, we will remain a leading supplier to this distribution company as well as to the national home improvement retailers with which we maintain direct relationships.'
Goldman, Sachs & Co. is acting as financial advisor to Georgia-Pacific in this transaction.
Headquartered in New York, Cerberus Capital Management, L.P. and its affiliated entities manage funds and accounts with capital in excess of $12 billion.