Chasing Champion

Champion International (CHA), mentioned in this column on Nov. 11, 1999 as a likely target of Finland's UPM-Kymmene, Europe's second-largest paper company, did indeed get a buyout offer: On Feb. 17, UPM agreed to buy Champion for stock equivalent in value to 66 a share. Papermaker Champion was trading at 55 then. But don't think this is a done deal. Whispers are that International Paper may jump in and make a better offer.

One thing going for IP--if it does try to wrest Champion away from UPM--is the slide in paper- company stock prices in Europe, including UPM. Analysts figure that the stock's big drop has reduced the value of the proposed $9 billion buyout, in which Champion shareholders are to get 1.99 UPM shares for each Champion share, to 52 a share. Champion's stock has since slid to 51.

Chasing Champion

"The longer Champion's price languishes at this low level, the more likely someone else will come in and make a competing bid," says Lise Shonfield, a paper analyst at investment firm ABN Amro. Shonfield, who rates Champion a buy, thinks International Paper would be a "prime candidate" to do just that. IP has been in an acquisitive mode: It bought Union Camp last year, vastly expanding its forest products operations. Shonfield says investors would, logically, welcome a 65-to-70 counterbid.

One money manager says that IP has been consulting with an investment bank on various scenarios on a possible IP-Champion deal.

UPM could, of course, sweeten its own bid to make sure that Champion shareholders get the 66-a-share it had offered. But it has to act fast, for IP could make trouble for the deal by simply offering to pay a premium over UPM's bid. IP and Champion declined comment. UPM couldn't be reached.

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