MacMillan Bloedel Sold to Americans
Walk anywhere in Vancouver and there are signs of lumber giant MacMillan Bloedel Ltd.'s presence: the Bloedel Conservatory in Queen Elizabeth Park, the H. R. MacMillan Planetarium, the MacMillan Bloedel Ltd. Canadiana Collection in the public library, and the H. R. MacMillan Gallery of Whales at the Vancouver Aquarium Marine Science Centre, to name a few. The company's history and the city's development are inextricably linked - as is the province's. Not only does MacMillan Bloedel employ 3,700 people in British Columbia, but since its inception in 1919 it has been the most influential and most controversial forest company in this tree-rich region of the country. Its founder, H. R. MacMillan, who died in 1976, "was unquestionably the greatest entrepreneur in B.C. history," says noted natural resources economist Peter Pearse.
So it was with shock that British Columbians learned last week that their multinational powerhouse was being sold for $3.6 billion to Weyerhaeuser Co. of Federal Way, Wash., the third-largest forest product firm in the United States. Yet so fluid are the commercial borders between the Pacific Northwest states and British Columbia that once the surprise wore off, most B.C. residents - other than worried environmentalists - embraced the deal, shedding any sentimentality over the company's Canadian origins. "I was amazed by the lack of opposition to this," says Ken Drushka, a former logger and author of a biography of H. R. MacMillan. Even Ray Smith, onetime president of MacMillan Bloedel who ran the company through the 1980s, swept nostalgia aside: "This is just another chapter in the evolution of the forest business in B.C.," he said.
B.C. Forest Minister Dave Zirnhelt, beleaguered by the province's moribund economy, indicated his government will not stand in the way of the Weyerhaeuser purchase. "You may say it's unfortunate that a B.C. company is being sold," he told Maclean's, "but that's the way the world is now." Drushka believes British Columbians are actually relieved MacMillan Bloedel is in the hands of a Washington state owner, rather than one from Ontario or Quebec. "Better to have somebody just down the road than 3,000 miles across the country," he says. Observers suggest there will be more consolidation in the B.C. forest industry and they argue the provincial government's inability to manage the economy, plus the low Canadian dollar, practically pushed MacMillan Bloedel into U.S. hands. News last week that B.C. billionaire Jimmy Pattison bought more than five million shares of Slocan Forest Products Ltd. of Richmond, B.C., also caught everyone's attention. Analysts began to wonder which forest company is next on the takeover hit list.
One of the most startling things about Weyerhaeuser's acquisition is that no one even guessed MacMillan Bloedel was on the block. President Tom Stephens, an Arkansas native who took the helm in September, 1997, said he had "kick-ass" intentions to turn the faltering company around and, after radical restructuring, the money began to flow in: by the end of 1998 profits were $42 million, a staggering recovery from the loss of $368 million the year before. With profits in hand, Stephens said he was looking for acquisitions. So when he received a call from Weyerhaeuser chief executive officer Steven Rogel on April 22 to buy the company, he was caught off guard. "Uh-oh," he says he thought, "this guy is serious."
Stephens and the MacMillan Bloedel board turned Rogel away a number of times, but then the offer became too sweet: shareholders will get 0.28 of Weyerhaeuser stock for each share of MacMillan Bloedel. That translates to $28.60 per share, well above the $21.05 MacMillan Bloedel was trading at on the Toronto Stock Exchange the Friday before the deal was announced.
Before the deal was finalized over the June 19 weekend, lawyers and investment bankers from RBC Dominion Securities Inc. rented rooms at a Richmond hotel under the guise of "the Robertsons," reportedly in town for a family reunion. "It was the only way the team could work without drawing attention," Stephens told Maclean's. The Robertson ruse kept the lid on the deal-making. By Sunday, once the i's were dotted, the MacMillan Bloedel team hit the telephones, letting about 80 employees know about the sale. Stephens met Zirnhelt and Premier Glen Clark that night and told them that "to oppose this would be political suicide."
Clark and Zirnhelt obviously listened. Since the announcement, the premier has been underlining the deal's advantages and Zirnhelt says it indicates a turnaround for the economy. The agreement also requires the blessing of shareholders and the Canadian and U.S. federal governments. The province will hold public meetings, but Stephens does not expect much opposition. He believes the deal will be approved within four months.
Initially, Weyerhaeuser was interested only in MacMillan Bloedel's U.S. packaging assets, which the B.C. firm was looking to unload. But after a closer look at the forest giant, CEO Rogel told Maclean's, "we liked it so much we wanted to buy the whole company." Rob Duncan, analyst with Research Capital Corp., believes "the American assets created the deal and the Canadian assets came along with them." Still, Rogel says Weyerhaeuser has no intention of selling the Canadian holdings, and observers hope his company, which he says is very pro-free trade, will help Canada in the softwood lumber dispute with the United States. "Maybe they will become more aggressive advocates for Canada," Duncan suggests.
It was Stephens's intense reshaping of MacMillan Bloedel - selling off major assets such as the paper business and cutting 2,700 jobs to bring the workforce down to 9,500 - that turned the company around. Even those who did not always agree with him on how B.C. forests should be managed admired his achievement. "He did a phenomenal job," says Jake Kerr, chairman of the Vancouver-based lumber firm Lignum Ltd. "The interesting thing was that you never knew what he was going to do next." Stephens even smoothed over thorny relations with environmentalists who battled MacMillan Bloedel over the logging of the pristine Clayoquot Sound and decried the way the company harvested timber. They were brought onside in June, 1998, when Stephens announced a phase-out of clear-cutting. Weyerhaeuser isn't committing itself to MacMillan Bloedel's lead on clear-cutting, but is studying the issue.
Stephens will be amply rewarded for his efforts. Once the Weyerhaeuser sale goes through, he will walk away $13 million richer and will return to live full time in Denver with his family. Next month, he plans to take them on a boat ride up the Jervis Inlet on the B.C. coast. Then, he may pick up the interests he left when he came to Vancouver, such as teaching economics at Denver's inner city schools. Stephens allows he is leaving with mixed emotions. "I've never enjoyed anything more than working at MacMillan Bloedel," he says. His tenure was brief but radical - not since H. R. MacMillan have there been so many changes in the B.C. forest business. Life in the woods here will never be the same.
Maclean's July 5, 1999