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Boise Announces Sale of Paper, Building Products, and Timberland Assets

Press release from the issuing company

BOISE, Idaho, July 26 -- Boise Cascade Corporation announced today that it has reached a definitive agreement to sell its paper, forest products, and timberland assets for approximately $3.7 billion to affiliates of Boise Cascade, L.L.C., a new company formed by Madison Dearborn Partners LLC (MDP), a leading private equity investment firm located in Chicago, Illinois. According to George J. Harad, chairman and chief executive officer, this step marks the completion of the company's review of strategic alternatives, originally announced in July 2003. "The transaction we are announcing today will complete Boise's transformation, begun in the mid-1990s, from a predominantly manufacturing-based company to a world-scale distribution company. By separating the company into two ongoing entities, we will successfully establish Boise Office Solutions, soon to be OfficeMax, as a strong independent company in the office products distribution business and place our paper and forest products assets in the hands of a management team that seeks to focus on those businesses. In the process, we will realize significant value for shareholders," Mr. Harad said. "I want to personally extend my thanks and appreciation to all Boise employees who have endured with grace and continued hard work a year of uncertainty as we acquired OfficeMax, reviewed strategic alternatives, and reached this successful milestone." Following the transaction, Boise Cascade Corporation will change its company and trade name to OfficeMax, Inc. It will continue to operate its office products distribution business, which had annualized first half 2004 sales of $8.6 billion, as its principal business. Through debt retirement and repurchases, OfficeMax is expected to reduce its outstanding debt to between $250 million to $300 million and be well positioned for continued growth. It will trade on the New York Stock Exchange under the ticker symbol OMX, and its corporate headquarters will be in Itasca, Illinois. When the transaction is completed, George J. Harad, currently chairman and chief executive officer of Boise Cascade Corporation, will become executive chairman of the board of OfficeMax, Inc. Chris Milliken, currently division president and chief executive officer for Boise Office Solutions, will be elected president and chief executive officer of OfficeMax, Inc. Boise will realize approximately $3.1 billion to $3.2 billion in cash proceeds after allowing for its $175 million reinvestment in Boise Cascade, L.L.C., and its affiliates, a retained interest in a timberland installment note, and certain transaction-related settlements. Boise currently expects to use approximately $2.2 billion to $2.3 billion of the net proceeds to pay down debt and other obligations and return the remaining $800 million to $1.0 billion of proceeds to shareholders through common and/or preferred stock buybacks, cash dividends, or a combination. The transaction is expected to be completed by mid-November 2004. The acquiring company, Boise Cascade, L.L.C., will be privately held and headquartered in Boise, Idaho. Its chief executive officer will be W. Thomas Stephens, former president and chief executive officer of MacMillan Bloedel Ltd. and former chairman, chief executive officer, and president of Manville Corporation. "In many respects, this transaction represents a return to Boise Cascade's traditional roots as a leader in the paper and forest products industry," said Mr. Stephens. "We will continue to operate under the Boise brand name, headquartered in Boise, Idaho, with a focus on operational excellence and delivering value to our customers." Madison Dearborn Partners is one of the largest and most experienced private equity firms in the United States. MDP has approximately $8 billion of equity capital under management and makes new investments through its most recent fund, Madison Dearborn Capital Partners IV, L.P., a $4 billion investment fund raised in 2001. MDP focuses on management buyout transitions and other private equity investments across a broad spectrum of industries including basic industries, communications, consumer, financial services, and healthcare. Over the last decade, MDP has been one of the most active global investors in the paper, packaging, and forest products sectors, having consummated approximately $11.7 billion of management buyout transactions over that period, including Buckeye Technologies Inc., Graphic Packaging International Corp. (formerly Riverwood International Corp.), Packaging Corporation of America, and Jefferson Smurfit Group, PLC. "Madison Dearborn Partners is delighted to enter into this transaction with Boise," said Samuel M. Mencoff, co-president of MDP. "This acquisition is consistent with MDP's investment objectives of acquiring industry-leading companies in partnership with outstanding and committed management teams. We look forward to working with Tom Stephens and the Boise Cascade management team as they pursue their strategy as a privately held company focused solely on their traditional paper and forest products markets." Included in the sale are the Boise Cascade Corporation headquarters building in Boise, Idaho, and substantially all of the assets of: Boise Building Solutions, a major producer of plywood, lumber, particleboard, and engineered wood products (laminated veneer lumber, wood I-joists, and laminated beams). Most of Boise's production is sold to independent wholesalers and dealers and through its own wholesale building materials distribution outlets. Boise manufactures wood products at 22 facilities in the United States, Canada, and Brazil. Boise's 27 wholesale building materials distribution facilities in the United States sell a wide range of building materials to retail lumber dealers, home centers specializing in the do-it-yourself market, and industrial customers. Boise Building Solutions' first half 2004 sales totaled $1.9 billion. Boise Paper Solutions, a manufacturer of uncoated free sheet papers -- office papers, printing papers, forms bond, envelope papers, and value-added papers. Boise's value-added papers include security papers, specialty base stocks, financial printing papers, recycled papers, and laser and inkjet papers. Boise also produces containerboard and corrugated containers, newsprint, and market pulp. The division operates five pulp and paper mills, two paper converting facilities, six paper distribution centers, and five corrugated container plants in the United States. Boise Paper Solutions recorded first half 2004 sales of $1.0 billion. Timberlands. Boise owns or controls approximately 2.3 million acres of timberland in the United States, 35,000 acres of eucalyptus plantation land in Brazil, and a 16,000-acre cottonwood fiber farm near Wallula, Washington. J.P. Morgan and Lehman Brothers served as financial advisors and provided committed financing to Madison Dearborn Partners in connection with this transaction. Madison Dearborn Partners was represented by the law firm of Kirkland & Ellis LLP. Boise's exclusive financial advisor for the transaction is Goldman, Sachs & Co.