Procter & Gamble Co., the consumer products giant, took its first step Thursday in moving out of the pulp and timber business by signing an agreement to sell part of it to Weyerhaeuser Co. for $600 million.
The agreement between Cincinnati-based P&G and Weyerhaeuser, one of the world's largest paper and woods products producers, includes facilities in Canada and Georgia. All the existing P&G employees will be offered jobs under the new ownership, said Mike Walters, a spokesman for Weyerhaeuser, headquartered in Tacoma, Wash.
P&G announced in March it would sell its pulp and timber business in order to focus on its consumer businessess.
'It's been long expected because it did not fit strategically,' said an analyst who follows the company. 'This positions Procter more in the consumer products and moves it away from ancillary businesses.'
The analyst said pulp prices have been coming down and 'it has been more of a strain on earnings.'NEWLN: involves Oglethrope, Ga., and saw -hlls in Grande Prairie and Grande Cache, Alberta, and Balso is approximately 175,000 acres of Georgia timberland.
'We received a fair price for the pulp mills and our employees will be joining a fine company,' said Edwin Artzt, chairman of P&G. 'We look forward to working with Weyerhaeuser as a supplier of pulp from these mills.'
Wall Street estimates put the price of P&G's entire pulp and timber business in a range from $750 million to $1.5 billion.
P&G said iential buyers for the Z emainder of#its pulp and timber business. Those holdings include a pulp mill and 665,000 acres of timberland in northern Florida and cotton linters pulp plant and the cellulose and specialties division, headquartered in Memphis, Tenn.
'We thi great opportunity and a win-win for both companies,' Weyerhaeuer President Jack Creighton said in a statement. 'The fit is right because making pulp and lumber and growing trees are core businesses.'
Initial reaction to the P&G-Weyerhaeuser pact by the investment community was negative.
On the New York Stock Exchange P&G shares fell 25 cents to $48.25 a share and Weyerhaeuser's stock lost 50 cents to $31.625 a share at the close.
In addition, two top ratings agencies downgraded Weyerhaeuser's debt.
Standard & Poor's Corp. said it lowered its rating on Weyerhaeuser's senior debt to single-'A' from single-'A'-plus. At the same time, the ratings agency affirmed Wey haeusgr1s conmercial pape rated debt was affected by the downgrade.
'While the additional debt will saction portends a beneficial partnership withghest level in over 12 years,' S&P said.
The ratings agency said the increase in debt comes at a time when 'pulp, paper and real estate markets are very soft.'
Cornelius Sewell, an anaylst at Argus Research in New York, said 'pulp prices had a major slowdown in 1990 and 1991. It's a cyclical commodity business and there has been some turnaround in this business.'
Sewell said the acquisition of the pulp business by Wdyerhaeusew was more significant than the timber because 'they have oodlespite
