Temple-Inland to break up business

Local business leaders question how breakup will affect them

LUFKIN — The announcement Monday by Temple-Inland Inc. that it is splitting into three stand-alone public companies has local business and economic development leaders wondering how the breakup will affect Temple manufacturing facilities in East Texas, and if so, to what degree.

Kenneth Jastrow II, company chairman and chief executive officer, said in a conference call Monday that Temple-Inland's building products manufacturing facilities "are state-of-the-art, low-cost and well-located to serve areas of the country projected to experience the highest rate of demand growth. We do a great job of taking care of our customers, and I can assure you, none of that changes in this plan. Our job one will be to take care of our customers."

The Forest Products division of Temple-Inland manufactures a wide range of building products, including lumber, particleboard, medium density fiberboard, gypsum wallboard and fiberboard at several East Texas facilities — Diboll and Pineland among those in East Texas.

The transformation plan for Temple-Inland includes retaining its manufacturing operations for corrugated packaging and building products, spinning off its financial services operation, spinning off its real estate operation, and selling its 1.8 million acres of strategic timberland — a portion of which is in East Texas.

Jastrow said the "new Temple-Inland will be a low-cost, highly efficient manufacturing company focused on corrugated packaging and building products. Corrugated packaging operating income has improved more than 1,000 percent since 2003, and our building products operation has achieved record earnings each of the past three years," he said.

As far as Angelina County is concerned, manufacturing operations for Diboll's Temple-Inland plants appears initially to be unaffected by the proposed changes; however, Jastrow did not address the question specifically in Monday's conference call, and local officials say they don't know how the proposed sale of timberlands — especially those here in East Texas — will affect the economic picture.

"I'm sure a lot of things have to be looked at, and they may not even know this early how it will affect us here in Angelina County," said Jerry Huffman, head of the Lufkin/Angelina County Chamber of Commerce. "We're just now finding out about it. If the company sells off timberland in East Texas, it will have an effect — but what that will be, we just don't know right now."

Jastrow said the employees of Temple-Inland "have created a great company and significant value for our shareholders. Their continued focus — to be the best — has driven our company's performance to record levels.

"We also have extremely strong management for each of our businesses. Our depth of management and our great employees make us confident in the success of this transformation plan and the future for each of our businesses."

Temple-Inland shares rose $6.65, or 12.1 percent, to $61.60 in premarket trading Monday.

While Temple-Inland will retain its corrugated packaging and building products operations, the company will spin off its financial services business, which owns Guaranty Bank in Texas and California, and its real estate unit, which operates as Forestar Real Estate Group. The transformation plan is anticipated to be completed by calendar year-end of 2007, Jastrow said.

Billionaire investor Carl Icahn acquired a 6.7 percent stake in Temple-Inland in January and advocated breaking up the company.