Ip May Latch Onto Potlatch

Is Potlatch, one of the nation's largest lumber producers, on the block? Or is the talk just hype generated by some investor group?

Rumors are swirling that International Paper will make a friendly offer of $60 a share. In just about a week, Potlatch's stock zoomed 25%, to 44 on May 21, as more than 2 million shares changed hands. The stock pulled back to 41 1/2 on May 22.

Potlatch refuses to comment, and so does IP. But several buyout pros are convinced that there have been at least informal discussions between Potlatch and IP. The word is that major Potlatch shareholders would welcome a cash-and-stock-swap deal, not only for tax purposes but also to make sure that they end up as big stakeholders in IP, a major worldwide forest-products and paper manufacturer .

But the stock's sudden upward rush may hamper any deal, since it would raise Potlatch's asking price, says one pro. Potlatch insiders are said to have been very upset by the leak of a possible buyout for just that reason. If the stock keeps climbing, a takeover will become more elusive--unless IP or another suitor is willing to dig deeper into its pockets to bag Potlatch.

Any buyout bid for Potlatch would have to be friendly. Over 50% of its shares are in the hands of management, directors, and friendly insiders. Plus, Potlatch has a rigid antitakeover defense: Every investor who has owned the stock for at least four years has four votes for each share, vs. one vote for those who've owned shares for less than four years.

Antitrust considerations shouldn't be a problem: Georgia-Pacific acquired Great Northern Nekoosa in 1990 without a hitch.

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