Catalyst board spurns Third Avenue
VANCOUVER -- Catalyst Paper Corp. has rejected an unsolicited bid to double its stake in the company from U.S. investment firm Third Avenue Man management LLC, calling it "inadequate" and "coercive."
Catalyst chief executive officer Russ Horner said the offer was unanimously turned down by the company's board of directors. He said Third Avenue's $3.30-a-share tender offer has precipitated inquiries about the Vancouver-based company from a range of other organizations, that Catalyst is "duty-bound" to investigate. "These inquiries may result in something superior, and they may not," he said.
Mr. Horner said his main goal is to raise productivity at a company with 3,800 employees and five mills on the south coast of British Columbia. Catalyst hasn't reported a profit since 2001.
Yesterday, the price of Catalyst stock rose 9 cents to $3.10 on the Toronto Stock Exchange.
To buy time to seek out alternative bids, Catalyst adopted a shareholders rights plan on Aug. 15 that will remain in place for 180 days unless Third Avenue management succeeds in having it quashed.
Shareholder rights plans, or poison pills, are common defence tactics that make unsolicited tender offers like the one Third Avenue has launched prohibitively expensive because they trigger the issuance of massive amounts of new shares.
Third Avenue portfolio manager Amit Wadhwaney would not comment on the contents of a directors circular released yesterday by Catalyst that criticized New York-based Third Avenue for failing to provide a clear indication of its plans for the paper company.
He has said previously that the offer for up to 39 million shares is driven by Catalyst's access to cheap energy, low-cost fibre and deep-water ports on the B.C. coast.
Industry sources said Third Avenue may be unhappy that Catalyst's pulp production costs are among the highest in the Western world, and may be trying to acquire the clout needed to do something about it.
BMO Nesbitt Burns Inc. analyst Stephen Atkinson said it cost Catalyst an average of $757 to produce a tonne of pulp last year, while the selling price averaged $654 a tonne.
He said efforts to find an alternative bid for Catalyst also may be hampered by the fact that newsprint consumption by U.S. daily newspapers is down 9 per cent since last July, according to the Pulp and Paper Products Council.
Mr. Atkinson doubts that bigger newsprint companies such as Abitibi-Consolidated Inc. of Montreal or Bowater Inc. of Greenville, S.C., might step up to buy Catalyst. "They don't have the balance sheets to buy anything," he said. As a result, he expects Third Avenue to succeed with its tender offer.
Late yesterday, Third Avenue CEO David Barse said the firm is disappointed at the decision by Catalyst's board. "Our bid gives shareholders a significant premium to the price of Catalyst stock at the time we announced the offer."
