BAD THINGS SOMETIMES HAPPEN WHEN A large company is sold or when two large commercial entities merge: Prices go up, services suffer, Wall Street reacts negatively. But sometimes a sale of a company hardly registers a blip on the business radar. Such is the case of Boise, Idaho–based Boise Cascade Corp.
Boise, which has a division producing building products such as plywood, particleboard, and engineered wood products and a division distributing office products, announced in July that it had reached an agreement to sell its paper, forest products, and timberland assets for about $3.7 billion to Boise Cascade LLC, a new company formed by Chicago-based private equity investment firm Madison Dearborn Partners.
“The new company is going back to its origins [as a major player in the paper and forest products industry],” says Denny Houston, sales and marketing manager for the company's engineered wood products division. “We're very excited about it.” Though there was initially concern that the sale would mean big changes in the building products landscape for builders, Houston says the sale is unlikely to cause any disruption and will be business as usual.
“For the customer, it will be completely transparent,” Houston explains. “We will retain the people, jobs, same distribution, and the same facilities. Nothing will change.”
Officials at Madison Dearborn Partners could not comment while the transaction was pending, but other industry folks appear to agree with that assessment. Chris H. Beyer, director of marketing for Atlanta-based GP Building Products, says that the building products business will not be affected by the sale. “Distribution of products will just migrate to other distribution outlets,” he says. Meanwhile, one purchasing vice president at Centex Homes says the company had no concerns and expects business to continue as usual.
One group of people that might actually welcome the sale of Boise is the stock analysts on Wall Street. Traditionally a group that has an aversion to confusion and uncertainty, the Street has always misunderstood Boise, Houston says. “Wall Street has had a problem analyzing the company because it was spread out over so many businesses,” he explains. “They did not understand what [Boise's] core business was.” With the split and clearly defined business interests, the company says it will realize significant value for shareholders.
The building products unit of Boise manufactures many of the structural components that go into houses and had sales of $1.9 billion in the first half of this year. The paper unit had about $1 billion in sales for the same period. The office products unit, however, reported sales of $4.35 billion during the same period.
Boise says in a press release that the sale marks the completion of the firm's review of strategic alternatives originally announced in July 2003. “The transaction will complete Boise's transformation, begun in the mid-1990s, from a predominantly manufacturing-based company to a world-scale distribution company,” said George J. Harad, chairman and CEO, in the release. “By separating the company into two ongoing entities, we will successfully establish Boise Office Solutions, soon to be OfficeMax, as a strong, independent company in the office products distribution business and place our paper and forest products assets in the hands of a management team that seeks to focus on those businesses.”
Once the transaction is completed, Boise Office Solutions will change its company and trade name to that of its current retail channel, OfficeMax, and will continue to operate its office products distribution as its principal business.
Learn more about markets featured in this article: Boise City, ID.