While the Specialty Products business may be profitable today, Wausau has spent a significant amount of capital in that business, and it is unclear how long the business will remain profitable and what additional capital investment may be required to keep the business competitive. Specifically, the 8% cost of capital threshold that the Company uses for this business seems arbitrary and surprisingly low, especially given the competitive environment and execution risks involved. Further, Wausau has a history of failing to achieve its financial targets in the Paper segment, as evidenced by the Company's recent admission that its Print & Color franchise had not earned acceptable returns since 2002 and was operating at a significant financial loss prior to its sale. We therefore seriously question whether continuing to invest in the Specialty Products business, rather than including it as part of a broad strategic alternatives review, is the best use of shareholder capital and management time and attention.Further, we believe that Wausau will garner a higher valuation in the public market as a pure-play tissue and towel business given the superior margins and lower risk profile in this business. To that end, as mentioned above, we believe the Company will be in the best position to maximize shareholder value by pursuing a sale of the Paper segment as a whole, or the entire Company.
Starboard Delivers Letter To Wausau Board Of Directors
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