Even if a full strategic review process demonstrates that selling the Technical Paper business and remaining a pure-play public Tissue business is the best way to maximize value for shareholders, there is still substantial need for new representation on the Board. As a pure-play Tissue business with operations primarily in Kentucky and Ohio, Wausau will need to reduce the duplicative overhead associated with its conglomerate structure and move its headquarters to a location that makes sense for the pro forma business. We seriously question whether this Board has the willingness to take those steps and restructure the management team to become a pure-play Tissue business when not under the immediate threat of another proxy contest. Further, the Tissue business, while highly profitable and valuable, has a complex road ahead of it as it starts up its new tissue machine and attempts to double its EBITDA to $150 million over five years by redesigning its products, expanding into new markets and reducing costs. With the exception of the two directors added last year as part of our settlement, Wausau's directors (outside of its Chairman and CEO) collectively have no experience in the tissue industry. Therefore, we believe it is imperative that the Board add individuals with substantial industry expertise, in order to help see the Company through this transition and ensure that the Company can execute on the opportunities ahead.
In light of Friday's act of bad faith on your part as Wausau's Chairman and the Company's history of failed commitments and poor execution, we have heightened concerns that the Board lacks the objectivity necessary to act in the best interest of shareholders. We have identified several highly qualified, independent directors with significant and successful experience in the tissue and paper industries who we believe will bring a fresh perspective to the boardroom and who can be extremely helpful in evaluating and executing on initiatives to unlock value at the Company. In addition, we feel that a direct shareholder representative on the Board is warranted, given the Board's past and recent actions and inactions. Despite your recent antics, we are ready and willing to continue to have an open dialogue with every intention of reaching a mutually agreeable solution. However, we are also prepared to move forward with an election contest in order to ensure that the best interests of all shareholders are represented on the Board.
Best Regards, Jeffrey C. SmithManaging MemberStarboard Value LP
January 11, 2013Wausau Paper Corp.100 Paper Place Mosinee, WI 54455Attn: Thomas J. Howatt, Chairman of the Board cc: Board of Directors, Henry C. Newell Dear Tom,