1 Georgia-Pacific Corp. offered to acquire Great Northern Nekoosa Corp. for $58 a share, or about $3.18 billion.
2 The offer capped a week of rumors that Georgia-Pacific, an Atlanta-based forest-products company, was considering making a bid for Nekoosa, a paper-products concern based in Norwalk, Conn.
3 Executives at Nekoosa couldn't be reached, and officials at Georgia Pacific declined to comment.
4 Analysts, however, were surprised because the tender offer appeared unsolicited. 'It's quite a bombshell,' said one, adding that the offer could spark a period of industry consolidation.
5 The two companies would appear to be a logical fit because of their complementary lines, and analysts described the offer, representing a 36% premium over Nekoosa's market price, as fair.
6 Nekoosa closed yesterday at $42.75, up $2.75, in New York Stock Exchange composite trading.
7 But industry observers still questioned whether Georgia Pacific will ultimately prevail. 'You have to watch out for counterbids,' said one analyst. 'International Paper or Weyerhaeuser could step in.'
8 The bid for Great Northern, a notice of which appears in an advertisement in today's Wall Street Journal, is the first big takeover offer since the collapse of a $6.79 billion buy-out of United Airlines parent UAL Corp. Oct. 13.
9 That collapse, following on the heels of disarray in the market for high-risk, high-yield bonds, cast doubt on the entire takeover business, which has fueled both big profits among Wall Street securities firms and big gains in the stock market generally.
10 While Georgia-Pacific's stock has outperformed the market in the past two years, Nekoosa has lagged the market in the same period.
11 Yesterday's rise in Nekoosa's share price came on volume of 786,700 shares, four times the daily average.
12 According to Dow Jones Professional Investor Report, options trading in Nekoosa was also heavy, ranking only behind International Business Machines Corp. and UAL in volume on the Chicago Board Options Exchange.
13 According to the Value Line Investment Survey, demand for Nekoosa's commodity paper has weakened, prompting earnings to decline by 6.6% in the third quarter ended Sept. 30.
14 Value Line added, 'With discounts widening on business papers, and with newsprint and corrugated shipments flat, we expect negative earnings comparisons through next year.'
15 By contrast, Value Line said Georgia-Pacific 'is in a comparatively good position to deal with weakening paper markets,' because its production is concentrated not in the Northwest but in the South, where it should be able to avoid some of the cost pressures from rising wood-chip prices.
16 Also, it isn't exposed to the weakening newsprint business, and is strong in the less-cyclical tissue business.
17 The purchase of Nekoosa would easily eclipse Georgia-Pacific's $530 million acquisition of Brunswick Pulp & Paper Co. last year.
18 That acquisition, which also included the assumption of $135 million in debt, was designed to allow Georgia-Pacific to capitalize on the strong demand for softwood pulp, as well as reduce its exposure to the housing market.
19 Wasserstein Perella & Co. is the dealer-manager for the offer, which will expire Nov. 29, unless extended.

Georgia - Pacific Corp . offered to acquire Great Northern Nekoosa Corp . for $ 58 a share , or about $ 3 . 18 billion .
offered to acquire
Why did they offer to acquire?