Koch to Buy Georgia-Pacific

Updated from 6:35 p.m. EST

Paper-manufacturing giant Georgia-Pacific (GP Quote) has agreed to be acquired by Koch Industries for $13.2 billion in cash.

The deal will turn Koch into the nation's largest private company, by combining Koch's $60 billion in annual revenue with Georgia-Pacific's $20 billion. Agricultural outfit Cargill has been No. 1, with $66.67 billion in 2004 revenue, according to Forbes.

In a news release Sunday, the companies said their boards had unanimously approved the deal, under which Koch will pay $48 for each Georgia-Pacific share, a 38% premium to the stock's $34.65 closing price Friday.

Koch, a Wichita, Kan.-based commodities conglomerate, will also assume some $7.8 billion of Georgia-Pacific debt.

Georgia-Pacific, whose brands include Brawny paper towels and Dixie cups, will become a wholly owned subsidiary of Koch but will retain its name and continue to operate out of its Atlanta headquarters.

A Koch subsidiary, Koch Forest Products, plans to launch a cash tender offer for all outstanding shares of George-Pacific stock this week, followed by a cash-out merger at the offer price.

Closing will be subject to antitrust clearance in various countries. Koch says it has obtained debt financing through Citigroup, although the deal is not contingent on financing.

"This transaction is the most dramatic step yet in Georgia-Pacific's history and its transformation," said A.D. Correll, Georgia-Pacific's chairman and CEO, in the release. "We are pleased it offers very significant, incremental value to our shareholders, as is warranted by our company's tremendous assets and talented employees."

Charles Koch, the chairman and CEO of Koch Industries, said: "By joining our group of privately held companies, Georgia-Pacific will be able to maintain a long-term focus on growth and a commitment to delivering value for all of its constituents. As a wholly owned Koch subsidiary, it will benefit from our historical practice of reinvesting up to 90% of earnings in our businesses."