You're watching...
International Paper CEO John Faraci on the company’s hostile takeover bid for Temple-Inland.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
-- a Fox Business exclusive interview from Memphis Tennessee is John Faraci chairman and CEO of International Paper.
-- very happy to have you on the -- area very well thanks -- Bihac.
Let's get right to this you've got an investor audience watching right now make your case.
Why should Temple-Inland except your bid by International Paper to buy it.
Well first thought -- done temple -- -- on -- negotiate with International Paper we've made a very serious bid at thirty dollars and sixty cents all cash of 46% premium to -- temple was selling at.
Before we made the bid.
And equally important to be more important at 20% premium to temples all time -- since -- Came Madison new company after their their spin off so a very it's a very serious and and I think a full bid reflects.
Much of temples future prospect.
X analysts call this a strong opening bid the ones that we talked to so I guess my question is at what point.
Did talks break down why because if you were having a conversation with Temple-Inland what happened there that you had to turn around and say we're launching a hostile bid tender offer.
Well.
We really did not.
Never got serious discussion started you know that's the that's the fact we we attempted to in temples and a good company we respect the management.
Who are unable to get negotiations.
Going in a serious manner.
Sometimes.
People are are still on the inside and they believe that their company is worth a lot we understand that however.
Your -- at thirty dollars sixty cents is still above slightly but still above.
The -- about the price right now for Temple-Inland so at at a 46% to deal here.
Premium I guess my next question is.
What happens you going to wait temple Finland were -- issued a press release and said we will look at this and get back to our shareholders in ten days but.
Would you prefer that the shareholders just make a decision right now.
Well obviously we preferred to be negotiating -- temple if we can't do that we have to go to temple share -- we've launched -- regulatory approval process.
And launched a tender offer and and we're proceeding down a path now that assumes that we're gonna not have negotiations but that's what -- prefer to do and do some due diligence and sit down with temple.
Wouldn't it have been cheaper to.
Just raise your bid mark a little bit or or two -- single alert.
Slight percentage to the upside and do a friendly deal here -- facing the cost of -- hostel that.
Well we made as I said it -- over a very serious and hand full price offer at thirty dollars and sixty cents at 46% premium to.
The market.
And that's the -- we've made we've gotten really no response and temples to what their value expectations were.
They didn't easily -- happy with another price they didn't even try and -- deal.
Now -- said that so grossly undervalues the company and make another offer and that's not what we're gonna do.
You're above what do you believe I'm imagining what you believe the company's really worth I -- that some OC -- operate what do you think per share this company is worth.
Well that's discussion we have to be having with temple and I prefer to do it that way we made today and offer -- reflects so what you think is it is a good they're ready for temple share owners and International Paper -- -- so.
We're not gonna overpay.
-- that we're gonna be disciplined but we've incorporated some attention temples future earnings growth prospects.
As well some of the merger benefits that we expect to get from putting two companies together.
And buying -- John would you still be able to keep your dividend for shareholders that you offer right now.
Yes yes he would focus international paper's got excellent free cash flow.
Cisco for example today announced that making that the word that they would have a billion in cuts a lot of people believe that could mean up to 101000 job cuts.
It's an important question how much of this deal and you've gotta do what you have to do but how -- this deal.
Is about the savings you could figure out with job cuts because there may be some redundancies between the two companies.
Well for surely as there are some redundancies -- you know essentially the most the merger benefits don't come from job eliminations they come from things like transportation -- for example.
In our packaging business today.
We spend more on transportation and we spend on labor over a billion dollars and the experience we have from recent acquisition we put.
Our packaging business together with another one it would have to be warehouses packaging business two years ago showed -- -- -- could save a huge amount logistics.
In these facilities we operator are like oil refineries they're big and complicated -- -- a lot of capital.
In getting the right product mix opt in to those facilities also -- -- the merger benefits.
So I'd say of the vast majority of the merger benefits are not job related cuts there other things to take unneeded costs out of the system and make us more competitive.
So am -- hearing you say John sort of pressing on this but that there wouldn't be massive job cuts or even.
Under a couple of hundred.
Well I don't wanna get into a specific number I would says that most of the merger benefits not come from job cuts that anytime you put two companies together.
If they're likely to be some overlap didn't you we haven't done any due diligence so really don't know we've we know the temples and good organization -- -- -- good company and I suspect they're pretty doing.
Okay I'm holding in my -- the letter that was signed by about 370.
Around sort of 470 so nearly one -- a hundred CEOs you're on it.
Asking congress and of course the White House the administration to please get a debt ceiling deal.
The Republicans are making some noise today that they may very well come out and asked for smaller deals that.
Get us sort of a lot I hate using the -- merchants over his kick the -- camp must be gigantic at this point.
Down the road but would you -- -- with a smaller deal or do you really and your fellow CEOs that are mentioned in this this letter.
-- you really prefer to see a major deal when do you -- one side is not compromising enough -- the other.
Well let's I don't -- -- insert myself into and of these discussions obviously there they're quite complicated they've gotten quite political.
And at the end of the day you know what we hope is there is a solution to this and as these things play out they see play out at the eleventh hour.
And we're approaching the eleventh hour but we're not there yet.
I think at the end of the day over time we're gonna need a combination of things we need -- change and spending we need to change and entitlements we need to change the tax code.
And we need growth in the economy and all four of those things -- Will generate the kind of fiscal discipline in revenue generation -- help solve the deficit problem we have but that's not a short term fix it's a long term one.
I'm gonna get yelled at because we're out of time but -- that they're so much talk about getting rid of certain entitlements and certainly certain.
Tax cuts or tax breaks for people like everybody keeps bringing up this private jet issue.
Would you as as a businessman as a CEO but as an individual taxpayer be okay with giving up some of the benefits that you get from tax deductions.
I I think there's a lot of work -- and simplify simplify the tax code and at the end of the day that means companies like International Paper.
Have a slightly higher tax rate that we've got a better -- Better set of economic policies that lead to more sustainable growth well we'd be here we go look at -- probably look at a favorable.
Oil which we have some sensibility like that inside the beltway John thank you so much.
Really appreciate articulates any time and we're going to be watching what happens with Temple-Inland.
And -- thank you John for coming on Fox Business exclusively today it's great to have you on the show.
