IDAHO Boise Cascade shifts focus with bid for OfficeMax

The company has been hurt by its timber operations.
BOISE, Idaho (AP) -- Boise Cascade Corp.'s billion-dollar acquisition of OfficeMax has raised questions about the one-time lumber company's continued presence in the timber industry.
Chairman George Harad said any decision on Boise Cascade's role in timber won't be made before late next year.
But analysts believe the company's $1.2 billion cash and stock bid for Cleveland-based OfficeMax Inc. completes Boise Cascade's shift from manufacturing to distribution.
OfficeMax, the third biggest U.S. office products retailer, will more than double the size of Boise Cascade's office products distribution business.
"That has been fairly obvious for some time where this is going," analyst Mark Wilde of Deutsche Bank-North America said after Monday's announcement. "We just thought we'd get there a little faster."
For years the market had been expecting Boise Cascade to be taken over or broken up and sold off because its parts were more valuable than the stock was trading for, Wilde said.
Future in question
The OfficeMax acquisition, however, not only dilutes Boise Cascade stock because more is being issued to buy the retailer but also delays any decision on the future of the paper production and building supply segments.
Wilde believes that delay leaves the stock price vulnerable if the merger hits any rough spots.
Don Roberts of CIBC World Markets Inc. blamed Boise Cascade's paper and wood products operations for holding the stock value in check and suggested any overall review would conclude they both should be jettisoned.
In comments to analysts and reporters Monday, Harad refused to concede that the sale or spinoff of those operations was a foregone conclusion. But he also agreed that shareholder value lies in distribution.
"We've now moved from the time I became CEO [in 1994] from a business mix that was two-thirds manufacturing and one-third distribution to a business mix after this transaction that will be 20 percent manufacturing and 80 percent distribution," Harad said.
Of last year's $7.4 billion in sales, office products distribution totaled $3.5 billion and distribution of paper and wood products the company manufactured accounted for nearly $3 billion more.
Boise Cascade was the nation's fourth largest wood and paper products company last year behind International Paper, Weyerhaeuser Co. and Georgia Pacific.
Evolving company
A decade ago, the paper and building products segments, including distribution, provided $3.2 billion of the company's $3.9 billion in sales.
The timber company formed by the 1957 merger of the Boise Payette Lumber Co. and the Cascade Lumber Co. now has just one plywood mill left in Idaho.
A pinched timber supply and high retooling costs were repeatedly blamed.
"It's obvious to us they're getting out of the tree and lumber business," said Sam Greer of the Idaho AFL-CIO.
Verle Steele of the Oregon AFL-CIO said imports from Canada, Chile and elsewhere in South America only increase the pressure.
Harad said growth rates in wood products and paper production have been limited in recent years. He specifically cited electronics' usurping the need for paper in many instances.
Although Boise Cascade has invested in upgrading wood products and paper production facilities, Harad said the effort has had its limits because "reinvesting in a market that is not growing is difficult to make a return on capital."
Since the mid-1990s, Boise Cascade's stock has gone from a high of around $47 per share to under $22 on Monday.
"Given the size of this transaction and the impact on our business mix, once it closes we're going to step back and look at the composition of the company," Harad said.
"We're not going into the review that we'll undertake with any preconceived notions."