Georgia-Pacific LLC, the U.S. paper and pulp producer controlled by the Koch brothers, agreed to buy Buckeye Technologies Inc. for about $1.45 billion to add cellulose products used in baby wipes and tires.
Closely held Georgia-Pacific will pay $37.50 a share, the companies said in a statement today. That’s 25 percent more than Memphis, Tennessee-based Buckeye’s closing price yesterday. The shares rose to $37.86 in New York, the biggest gain in five years.
Buckeye plants in the U.S. and Germany make specialty fibers and materials from wood and cotton, used in products including diapers and cords that strengthen tires. Established in the 1900s as a cottonseed crushing division of Procter & Gamble Co., the company was bought out by management and Madison Dearborn Partners LLC in 1993 and had an initial public offering in 1995, according to its website.
Buckeye production of highly engineered cellulose products is a good fit with both Georgia-Pacific and its parent Koch Industries Inc., said Steven Chercover, an analyst at DA Davidson & Co in Lake Oswego, Oregon.
“What Koch brings to the party is they are extremely focused on process,” he said in a phone interview. “Whether your feedstock is oil and gas or wood, if you’re converting a feedstock into something else, they are masters at it.”
The acquisition is the largest since Georgia-Pacific was acquired by Koch Industries in 2005, according to data compiled by Bloomberg. Georgia-Pacific, which makes paper, pulp and related chemicals, agreed to pay $750 million to buy International Paper Co.’s Temple Inland Building Products division in December.
Brothers David Koch and Charles Koch are executives and owners of Wichita, Kansas-based Koch Industries. Their holdings in the company make them the world’s sixth- and seventh-richest men, with an estimated wealth of $45.6 billion each, according to the Bloomberg Billionaires Index.
The Buckeye acquisition is subject to antitrust approval and requires that 75 percent of Buckeye’s holders tender their shares. Georgia-Pacific is entitled to a $48.6 million breakup fee if Buckeye accepts a superior bid.
NewSouth Capital Management Inc., a Memphis-based investment company, is the largest shareholder in Buckeye with a 7.9 percent stake, according to data compiled by Bloomberg.
Buckeye’s financial adviser is Barclays Plc and Dechert LLP is its legal adviser. UBS AG and Blackstone Group LP are Georgia-Pacific’s financial advisers.