Weyerhaeuser Barks for Willamette: Will Investors Bite?

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Weyerhaeuser

(WY) - Get Report

wants to own competitor

Willamette

(WLL) - Get Report

, even if that means getting hostile.

The forest and paper company launched a $5.4 billion bid for its rival, offering Willamette's shareholders $48 a share and saying it will assume $1.7 billion in Willamette's debt. The hostile bid comes after Willamette rejected earlier offers of $36 and $43 a share for the company. Willamette acknowledged that it's received the latest offer and said it will make a recommendation to shareholders later in the day.

The proposal for $48 a share is not new, however. Weyerhaeuser recently told the market it was offering that amount in a tactic known as a "bear hug." That's when a company goes public with news of a possible deal in hopes that shareholders of the target company will pressure their company to accept the offer.

So, whatever Willamette recommends to its shareholders, the company is now in play and can become a takeover target for someone, even if its not Weyerhaeuser.

Yesterday, Willamette closed within 6 cents of $50, which is a 52-week high. But if analysts are correct, Willamette could go for far more than the $48 that is currently on the table.

Deutsche Banc Alex. Brown

analyst Mark Wilde, writing in a report that Willamette is attempting to make a case for a higher valuation, said he expects the company to fetch $55 or more per share.