Georgia-Pacific Distribution Center Now Owned By BlueLinx

By Kaaren Valenta

Georgia-Pacific Corp announced this week that it has sold its building products distribution business, including its Newtown facility, to a new company, BlueLinx Corp, owned by Cerberus Capital Management LP, a private, New York-based investment firm, and members of the distribution business’s management team.

But it was business as usual for the 32 employees at the Newtown facility, according to branch manager Dwayne Uzelac.

“Everything is still the same, only the name has changed,” Mr Uzelac said on Wednesday. “We still have the same number of employees. In fact, we are looking to grow. The only thing that has changed is the bank account where the money goes.”

Georgia-Pacific expects the transaction, which officially took place last Friday, May 7, to result in net after-tax proceeds of approximately $780 million, which will be used to reduce debt. The company expects to record an after-tax gain on the sale of approximately $20 million in the second quarter.

In addition, Georgia-Pacific entered into a six-year agreement for the distribution business to continue purchasing structural panels, lumber, and other building products manufactured by Georgia-Pacific. This agreement contains substantially similar terms as the current arrangement between Georgia-Pacific’s building products manufacturing and building products distribution businesses.

All current employees of the distribution business, including the current management team led by Chuck McElrea, president – building products distribution, are expected to join the new company.

“This agreement is yet another major step forward in reducing debt and sharpening the focus of Georgia-Pacific,” said Pete Correll, chairman and chief executive officer, in a news release. “We believe this transaction represents a fair valuation of the distribution business, is consistent with our strategy and is in our shareholders’ long-term interest.”

Distinct from the company’s building products manufacturing segment, Georgia-Pacific’s building products distribution business is the leading distributor of building products in the United States. The distribution division’s 2003 net sales were $4.3 billion.

The business employs approximately 3,400 people and operates 63 US-based warehouses, plus one location in Canada, from which it distributes more than 10,000 products across 14 categories, including structural panels, hardwood plywood, roofing, insulation, metal products, lumber, paneling, vinyl siding, and particleboard. These products are shipped via a fleet of 900 trucks, one of the nation’s largest such fleets.

“The building products distribution business has been a cornerstone of Georgia-Pacific for decades and these outstanding employees have built a truly world-class organization,” said Dave Paterson, executive vice president and president – building products. “This new building products distribution company and our building products manufacturing business will each independently focus on their core strengths and strategies while maintaining a strong customer-supplier relationship.

“The distribution business’s separation from Georgia-Pacific will be an opportunity for it to grow and excel, while our building products manufacturing business will continue to focus on differentiating its products through branding and innovation,” Mr Paterson added. “In addition, we will remain a leading supplier to this distribution company as well as to the national home improvement retailers with which we maintain direct relationships.”

Headquartered in New York, Cerberus Capital Management, LP, and its affiliated entities manage funds and accounts with capital in excess of $12 billion. The company specializes in acquiring operating companies that continue in business under existing management and staff.

Georgia-Pacific also sold its nonintegrated pulp operations in Georgia and Mississippi and its interest in three Brazilian companies that own a minority, nonvoting interest in Brazilian pulp company Aracruz Celulose SA. Combined with the distribution company sale, the transactions are expected to result in total net after-tax proceeds of approximately $1.4 billion, which will be used to reduce corporate debt.

Headquartered in Atlanta, Georgia-Pacific is one of the world’s leading manufacturers and marketers of tissue, packaging, paper, building products, and related chemicals. With 2003 annual sales of more than $20 billion, the company employs approximately 55,000 people at more than 300 locations in North America and Europe. Its familiar consumer tissue brands include Quilted Northern, Angel Soft, Brawny, Sparkle, Soft ‘n Gentle, Mardi Gras, So-Dri, Green Forest, and Vanity Fair, as well as the Dixie brand of disposable cups, plates, and cutlery. Georgia-Pacific’s building products manufacturing business has long been among the nation’s leading suppliers of building products to lumber and building materials dealers and large do-it-yourself warehouse retailers.