-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ie06LS/pFEGQ2Bs+0U4tmMvcRj0pM0x2Da4pxQ4rgEgCYnUcNSL34LGYgvkbzfDV rZI+7bHotHT10W4wVvz/iw== /in/edgar/work/0000931763-00-001723/0000931763-00-001723.txt : 20000720 0000931763-00-001723.hdr.sgml : 20000720 ACCESSION NUMBER: 0000931763-00-001723 CONFORMED SUBMISSION TYPE: 425 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20000719 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FORT JAMES CORP CENTRAL INDEX KEY: 0000053117 STANDARD INDUSTRIAL CLASSIFICATION: [2621 ] IRS NUMBER: 540848173 STATE OF INCORPORATION: VA FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 425 SEC ACT: SEC FILE NUMBER: 001-07911 FILM NUMBER: 675566 BUSINESS ADDRESS: STREET 1: 1650 LAKE COOK RD STREET 2: PO BOX 89 CITY: DEERFIELD STATE: IL ZIP: 60015 BUSINESS PHONE: 8473175000 MAIL ADDRESS: STREET 1: 1650 LAKE COOK RD STREET 2: PO BOX 89 CITY: DEERFIELD STATE: IL ZIP: 60015 FORMER COMPANY: FORMER CONFORMED NAME: JAMES RIVER CORP OF VIRGINIA DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GEORGIA PACIFIC CORP CENTRAL INDEX KEY: 0000041077 STANDARD INDUSTRIAL CLASSIFICATION: [2400 ] IRS NUMBER: 930432081 STATE OF INCORPORATION: GA FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 425 BUSINESS ADDRESS: STREET 1: 133 PEACHTREE ST NE STREET 2: 41ST FL CITY: ATLANTA STATE: GA ZIP: 30303 BUSINESS PHONE: 4045214000 MAIL ADDRESS: STREET 1: 133 PEACHTREE ST NE STREET 2: 41ST FL CITY: ATLANTA STATE: GA ZIP: 30303 425 1 0001.txt GEORGIA-PACIFIC CORPORATION Filed by Georgia-Pacific Corporation Pursuant to Rule 425 under the Securities Act of 1933 Subject Company: Fort James Corp. Commission File No. 1-7911 Contact Name: Richard A. Good [LOGO OF GEORGIA-PACIFIC] Georgia-Pacific Analyst Presentation July 18, 2000 Safe harbor This presentation contains certain "forward-looking statements" within the meaning of federal securities laws about our financial condition, results of operations and business. You can find many of these statements by looking for words such as "believes", "expects," "anticipates", "estimates", or similar expressions used in this presentation. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results, performance or achievements to be materially different from our assumptions about future results, performance or achievements expressed or implied by us in those statements. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. You are cautioned not to place undue reliance on such statements, which speak only as of the date of this presentation. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We undertake no obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events. We discuss many of the assumptions in our filings with the SEC and you should review them. Summary of transactions . Fort James . Step-change in G-P's portfolio . Creates world's largest tissue company . Expands one of the greatest core-competencies of G-P . The Timber Company . Reinforces image of breaking from conventions of forest products industry myths . Creates tremendous value for Timber Company shareholders These key moves are part of a transformation towards: . Generating more stable and predictable earnings . Achieving higher levels of profitability . Focusing on growth in value through improving the portfolio of assets . well-timed acquisitions and divestitures . continued capital discipline . improving returns while reducing risk . Enhancing GP's historical financial strategy of returning excess cash to shareholders Agenda . Strategic Overview . Acquisition of Fort James to create a global tissue leader . Spin-off/merger of TGP to unlock share value . Financial Overview . Summary Strategic Overview The goal is to decrease the volatility and increase the quality of cash flows to enhance value [GRAPH OF EXISTING BU MARKETS] [GRAPH OF PROBABILITY OF RETURN ON CAPITAL] How are we going to improve shareholder value? We are focusing management on value-added products and services driven by customer needs... From... . Selling undifferentiated commodities . Competing in highly fragmented industry segments . Operating asset-based businesses competing primarily on price . Owning businesses across the entire value chain ...To . Marketing value-added products and services . Participating in less fragmented businesses . Combining operational excellence with customer intimacy to expand points of differentiation . Focusing on finished-product end of the value chain ...to decrease volatility and increase quality of cash flows Moving forward in the value chain FROM...competing as a leader in operational excellence focusing on the commodity area of the value chain [GRAPH DOMTAR GYPSUM] TO...leveraging operational excellence and moving closer to the customer by providing increasingly differentiated, customer-focused products and services [GRAPH MIGRATION PATH] Fort James Acquisition Overview of Fort James acquisition . Results of strategic analysis, recent stock price performance of Fort James and success with the Wisconsin Tissue integration led to our initiation of this transaction . Subsequent discussions resulted in a reasonable price at an attractive time . EPS accretive across the cycle . Synergies reach full run rate of over $500 million p.a. in 2002 . Best management will run the new business Transaction terms: Transaction: 80% cash, 2-% stock acquisition of Fort James Consideration: $29.60 in cash and 0.2644 Georgia-Pacific shares per Fort James share (up to maximum of $40.00 in value delivered per FJ share) $37.17 as of 7/14 Enterprise Value: Approximately $11.3 billion Transaction Structure: Exchange offer Pro Forma Ownership: Georgia-Pacific 74%, Fort James 26% Board of Directors: 12 existing Georgia-Pacific directors plus 3 new directors from Fort James Senior Management: Executive management from Georgia-pacific to remain. Selected Fort James operational management to be retained Expected Closing Date: Forth quarter of 2000 Strategic rationale for the acquisition Major step in the transformation of Georgia-Pacific to a more stable, higher value-added business Business Unit Value . More than doubles tissue business, making it a leader in the NA market . Provides substantial European presence with strong brands and management . Best operator in the business moving more heavily into value-added products on a global scale Synergy Value . Expands a business in which Georgia-Pacific has a proven track record . Utilizes Georgia-Pacific's operating capabilities to unlock in excess of $500 million of annual pre-tax synergies Corporate Value . Moves Georgia-Pacific's portfolio closer to the customer by increasing sales of branded products . Strengthens consumer focus with the addition of several well-known brand names (e.g., Brawny, Quilted Northern(R), Mardi Gras(R), Vanity Fair(R), Soft'n Gentle(R), Lotus(R) and Dixie(R)) . Reduces the volatility and risk of pro forma cash flows providing a more stable platform for the future Financially disciplined acquisition Acquisition at a reasonable price at an attractive time [Graph] . Tissue Fiber costs stabilizing . Improving free cash flows from paper cycle . Europe stabilizing with upside potential Tissue products - Attractive pricing dynamics [Graph] Source: Bureau of Labor Statistics. Company Overview Fort James [Graph] 2000E Revenue Breakdown Dixie 11% Papers & Fiber 12% Europe Tissue 24% North America Tissue 53% 2000E Statistics* ($ in Billions) Sales $7.1 EBITDA $1.4 % Margin 20.0% EBIT $0.9 % Margin 13.2% Strengths . Leading brand names . Established market position . Low cost producer . Innovative products * Source: Wall Street equity research. Fort James tissue mill sites [Map of U.S.] . Camas . Clatskanie . Halsey . Green Bay . Muskogee . Pennington . Rincon . Old Town * Camas * Clatskanie . Tissue * Communications Papers Fort James North American Tissue Operations # of Tissue Capacity Location Machines (in 000s) Furnish - ------------------------------------------------------------ Green Bay - East 5 180 Virgin/Deink Green Bay - West 9 410 Deink Old Town 2 87 Virgin Savannah (Rincon) 5 377 Deink Noheda 5 260 Virgin Muskogee 5 331 Deink Halsey 2 98 Deink/Virgin Wauna (Clatskanie) 3 195 Virgin/Deink Camas 6 149 Virgin/Deink -- ----- 42 2,088 == ===== Additional: Wauna: 1 UFS Machine (110K) Camas: 6 UFS Machines (417K0 Fort James European tissue operations [Map of Europe] Stubbins, UK Gridgend, UK Oughtibridge, UK Cuiji, Netherlands Hondouville, France Gien, France Kunheim, France Allo, Spain Castelnuovo, Italy Avigliano, Italy Patras, Greece Karamursel, Turkey Nokia, Finland Fort James European tissue operations Capacity Non-integrated Machines (in 000's) France 5 135 Greece 1 20 Italy 2 75 Spain 2 100 Turkey 2 40 Sub-Total 12 370 De-Inked Finland 3 105 France 2 75 Netherlands 2 70 U.K. 8 235 -- --- Sub-Total 15 485 -- --- Total European 27 855 -- --- Dixie(R) operations . Leading branded manufacturer of disposable plates and cups . $800 million in annual sales . Raw material base . Paperboard (largely integrated), paper, plastic resins . Plant Base . 11 converting plants in the U.S. and Canada [MAP APPEARS HERE] Company overview [LOGO OF GEORGIA PACIFIC] 2000E Statistics* ($ in Billions) Sales $21.5 EBITDA $ 2.9 % Margin 13.4% EBIT $ 2.0 % Margin 9.3% * Source:Wall Street equity research. Strengths . Experienced and proven management team . Strong operating track record . Proven ability to integrate acquisitions [PIE CHART] Pro forma business mix Mix shifts towards businesses with more predictable earnings and cash flow [GRAPH APPEARS HERE] Fort James business mix is a good strategic fit Leading Strong Product Market Brand Distribution Rationalization Segment Position Names Synergies Opportunities Comments - ------- -------- ------ ------------ --------------- -------- North American . Low cost Tissue X X X X producer . Proven track record . Strong customer relationships . Capex savings opportunities European Tissue X X . Foothold for growth . Market improvement potential Dixie X X X . High value- added products . Consumer focused Communications Paper & Fibers X X . Leading producer in Western U.S. . Improved profitability potential within Georgia- Pacific system Fort James' tissue provides an excellent fit . G-P will become: . an international tissue company capable of serving global retailers. 75% of the top 20 global retailers now conduct business in countries outside of North America . a full-line tissue manufacturer with a very low cost position . G-P will acquire: . premium tissue and towel brands to complement Angel Soft and Sparkle . sufficient manufacturing capacity to support private label product offerings . significant technical, research & development capabilities to support product and manufacturing process innovations Synergy opportunities [GRAPH SYNERGIES REACH FULL RUN RATE OF $200 MILLIOM IN 2002] Why will we be able to successfully deliver on this acquisition? Recent Acquisitions Pre-Acquisition Goal Performance to Date CeCorr Achieve an average annual 18% ahead of plan cash flow of $20.4 mm in first full year of operation. Full year 2000 estimates above plan Unisource Capture $56 mm in synergies $84 mm achieved ahead in the first year of plan ($25 mm over pre-acquisition target) Wisconsin Tissue Complete organization Accomplished on, or integration, product ahead of plan rationalization and order management system consolidation within 6 months Domtar Gypsum Achieve above cost of capital Acquired the business return on investment for $363 mm in 1997. Generated $954 mm in EBIT in first 3 years following acquisition Recent acquisitions demonstrate Georgia-Pacific's ability to deliver on promises Synergy Comparison [GRAPH OF SYNERGIES AS A PERCENT OF TARGET REVENUE] We achieved all key Wisconsin Tissue JV milestones established for the first 180 days Oct. 99 New product line approved Eliminated almost 300 SKU's (40% reduction) Key to realizing $15 million of manufacturing synergies Oct. 99 New organization structure approved Eliminated over 200 positions $15 million of annual savings Dec. 99 Integrated business plans in place for 2000 New sales force in place Jan 00 Customer service centers consolidated Financial and salaried payroll systems consolidated A/P and payroll functions moved to shared service centers Apr. 00 Integrated product line in production Single order management system in place (SAP) Hourly payroll systems Wisconsin Tissue - Aggressive product line integration Goals . Rationalized and integrated product line . Full product line with definable quality tiers . Flexibility in siting paper production and converting for financial benefits . Available for 4/1/2000 roll-out Accomplishments . Quality tiers defined: Proprietary (Control) Park Avenue Ultra Coronet Main Street Second Nature Specialty/Private Label . Standard stock items reduced from 165 to 101 (39%) . Dispensers reduced from 125 to 66 (47%) . Specialty items reduced from 389 to 213 (45%) Historical tissue business results [GRAPH OF SALES VOLUME GROWTH--CONSUMER] [GRAPH OF SALES VOLUME GROWTH--AFH /(1)/] [GRAPH OF EBITDA GROWTH /*(2)/] G-P's Tissue has averaged 16% ROCE over the past 8 years (1) The Away From Home business includes the Wisconsin Tissue operations beginning in fourth quarter 1999. Prior to 1997, growth was constrained by paper availability. (2) Tissue industry pricing peaked in 1996, and gradually declined over the next 3 years due to continued weak pulp markets. Steady financial results were achieved in spite of these price declines. Management team . Management team in place have: . strong operating track record . delivered synergies at Wisconsin Tissue . Financial management of Georgia-Pacific remains in place . Continuity of management in European Tissue and Dixie Summary of Fort James acquisition . Major step in the transformation of Georgia-Pacific towards higher value- added business with more stable and predictable earnings and cash flow . Fort James' business mix is a good strategic fit . Fort James' strong brand names move Georgia-Pacific closer to the customer . Acquisition at a reasonable price at an attractive time . Synergies reach full run rate of over $500 million p.a. . EPS accretive across the cycle . Best management team running the new business The Timber Company Separation of The Timber Company has been a success . "Win-Win" for G-P and TGP . G-P Group has new sources of timber and is doing a better job at procuring wood at the lowest possible cost . Separation has uncovered true operating performance of manufacturing without subsidies . TGP has been able to opportunistically time the sale of timberlands, realizing the highest possible value . TGP's value has not been fully reflected in the stock in our opinion . The potential next logical step is a total spin-off . A spin combined with a merger with Plum Creek will be a "home run" Transaction terms: Transaction: Two step spin-merger involving a spin-off of TGP and a subsequent exchange for PCL shares Consideration: 1.37 PLC shares per TGP share Valuation: $37.51 per share value in stock based on PCL current market price ($27.375 on 7/17/00)-55% nominal premium to TGP price of $24.25 Additional cash dividend per share of approx. $1.50 to TGP shareholders, assuming a post transaction E & P distribution of $2000MM Tax Treatment: Pending IRS Ruling: . Spin-off will be tax free to G-P and TGP shareholders TGP exchange ratio is fair to our shareholders . This offer price is a premium to: . Prior day closing stock price of $24.25 . TGP's 52-week high of $27.19 . Wall Street analyst price targets - Merrill Lynch $29 - Morgan Stanley $33 - Salomon Smith Barney $32 . The offer price represents 11.7x 2000E TEV/EBITDA . Dividend per share for TGP shareholders increases from $1.00 to $3.12 per equivalent TGP share Plum Creek Timber Co. Overview . 4th largest private owner of timberland in US with 3.2MM acres . Lumber capacity 743 mmbf . Plywood capacity 337 mmsf . MDF capacity 136 mmsf 2000E Statistics* ($ in Millions) Sales $750 EBITDA $230 % Margin 30.3% EBIT $155 % Margin 20.6% 2000E Revenue Breakdown [PIE CHART OF 2000E REVENUE BREAKDOWN] Timber 42% Land Sales 4% Lumber 36% Panels 18% Strengths . Highly attractive asset base . Strong management focused on shareholder returns . Good corporate structure to hold and grow timber assets Overview of PCL timberland holdings [MAP OF UNITED STATES] Cascade Region 285,000 Acres 2.1BBF of Merchantable Timber /(1)/ Rocky Mountain Region 1,488,000 Acres /(2)/ 6.8BBF of Merchantable Timber /(1)/ 9 Conversion Facilities Northeast Region 912,000 2.8BBF of Merchantable Timber /(1)/ 24MM tons of Pulpwood Southern Region 523,000 Acres 2.4BBF of Merchantable Timber 2 Conversion Facilities (1) Inventory as of 1/1/00. (2) Pro forma for sale of 91,000 acres to Crown-Pacific Pro forma PCL will become the 2nd largest private timberland owner in the US [MAP OF UNITED STATES] Cascade Region 0.6 million Acres Rocky Mountain Region 1.5 million Acres Northeast Region 1.4 million Acres Southern Region 4.5 million Acres Total Pro Forma Timberlands 8.0 million Acres The merged company will be the preeminent investment vehicle in the timber industry PCL will have more substantial cash flows for distribution to shareholders and for acquisitions TGP PCL /(1)/ Pro Forma /(2)/ Financial 2000E FFO (3) $ 287 $ 160 $ 414 2000E EBITDA 332 225 567 Enterprise Value (4) 2,919 2,606 5,175 Equity Value (4) 1,919 1,940 3,859 (1) No taxes included except for TGP tactical land sales. One-time gain not included in 2000 for PCL (2) Pro Forma Cash Flow items include synergies of $10MM (3) FFO defined as net income plus D&A and cost of timber harvested. FFO excludes taxes (4) As of July 14, 2000 Source: Wall Street estimates. The spin-off of TGP will not disrupt G-P's timber supply . Over 80% of G-P's timber is from other sources [PIE CHART OF G-P'S TIMBER SUPPLY] 17% Sourced from TGP 83% Sourced from 3rd Parties . Supply agreements will cover all the G-P facilities that significantly rely on The Timber Company furnish . Only 6 sawmills and 4 panel plants derive more than 25% of their furnish from TGP lands The Timber Company transaction summary . Impact for The Timber Company shareholders: . Delivers 55% premium and increased dividend to TGP shareholders . Creates the premier timber investment - diversified timber portfolio - major timber presence in all significant regions in the US - increase size and liquidity of combined company . Increases ability to grow timber ownership - corporate structure improves opportunities for growth through acquisition . TGP shareowners will own 62% of the merged company . Impact for Georgia-Pacific Group shareholders: . Consistent with move away from raw material commodity-based business . G-P still has access to the timber (supply agreement) Financial Overview Financial objectives . Generate excess cash in all markets to return capital through share repurchases . Continue capital spending discipline . Enhance predictability of earnings . Exhibit financial discipline in all acquisitions . Achieve operational efficiencies/realize synergies . Maintain target debt level and investment grade credit ratings to minimize cost of capital 2000E Pro forma financials ($ in Billions) Georgia-Pacific Fort James Combined /(a)/ Sales $21.5 $ 7.1 $28.6 EBITDA $ 2.9 $ 1.4 $ 4.3 % Margin 13.4% 20.0% 15.0% Operating Profit $ 2.0 $ 0.9 $ 2.9 % Margin 9.3% 13.2% 10.2% *Source: Wall Street equity research (a) Represents a simple summation and does not include synergies and pro forma adjustments Pro forma financials ($ in Billions) Georgia-Pacific /(a)/ Fort James /(a)/ Pro Forma /(b)/ Assets $15.6 $ 7.1 $29.6 Debt $ 6.1 $ 3.5 $16.0 Common Equity $ 3.9 $ 1.0 $ 5.4 Debt/Total Cap. 61.2% 77.3% 74.6% Debt/EBITDA /(c)/ 2.3x 2.6x 4.0x Int. Coverage /(c)/ 5.7x 5.8x 3.2x (a) Balance sheet as of Q1/2000 (b) Adjusted for Goodwill, debt and shares issued (c) EBITDA and Interest LTM as of Q1/2000 New target debt level is in line with historical financial discipline . New target debt level is $9.5 billion . At this debt level, credit ratios equal or exceed current combined ratios . Expect to reach target debt level in 2 to 3 years and then resume share repurchases EPS Accretion/Dilution Transaction is accretive to cash EPS in all years and to reported EPS in 2002 and beyond Incremental EPS Effect [CHART OF INCREMENTAL EPS EFFECT] Summary Summary Georgia-Pacific will maintain its core values while undergoing portfolio transformation . Generate more cash flow across all markets to return to shareholders . Customer driven . Operational excellence . Adding value through improving portfolio returns while reducing risk -----END PRIVACY-ENHANCED MESSAGE-----