Company Name: Weyerhaeuser Co.
Public Availability Date: Aug. 26, 1977
 

[INQUIRY LETTER]

WEYERHAEUSER COMPANY

[ Original Text Illegible ]

Tacoma, Washington 98410

June 29, 1977

1933 Act
Rule 144(d)(3)(A) & (d)(4)(C)

Securities and Exchange Commission
Division of Corporation Finance
500 North Capitol Street, N.W.
Washington DC 20549

Re: Contemplated Acquisition of Oakdell, Inc.

Dear Sirs:

Weyerhaeuser Company ("Weyerhaeuser") plans to enter into a Plan of Reorganization and Agreement (the "Agreement") with Oakdell, Inc. ("Oakdell"), Nursery B, Inc. ("Nursery B"), and Jack Christmas and Joan Christmas. As a part of this Agreement, Weyerhaeuser will cause its newly formed and wholly owned subsidiary, Nursery B, to execute a Merger Agreement with Oakdell providing for the merger of Oakdell into Nursery B, and the conversion of the Common Stock of Oakdell into (a) 61,243 shares of Common Stock of Oakdell into (a) 61,243 shares of Common Stock of Weyerhaeuser, and (b) the contingent right to receive 7,205 additional shares of Weyerhaeuser Common Stock depending on the market performance of the shares initially issued.

At the closing, which is scheduled for July 15, 1977, Weyerhaeuser will issue to the four stockholders of Oakdell the 61,243 shares of Weyerhaeuser Common Stock. Weyerhaeuser will also undertake in the event the market price of 61,243 shares of Weyerhaeuser Common Stock issued to the Oakdell stockholders has not achieved a per share value of $38 based on the average price of Weyerhaeuser Common Stock traded during the five-day period of June 10, 11, 12, 13 and 16, 1980, to issue to the Oakdell stockholders up to a maximum of 7,205 additional shares of Weyerhaeuser Common Stock based on a formula whereby Weyerhaeuser shall deliver to each person who was at Closing a shareholder of Oakdell a number of additional shares of Weyerhaeuser Common Stock valued at such average price, equal in value to the difference between: (i) the number of shares of Weyerhaeuser Common Stock delivered to such shareholder at the Closing times 38, less (ii) the number of shares of Weyerhaeuser Common Stock delivered to such shareholder at the Closing times such average price; provided that if such average price is less than $34 per share, it shall be deemed to be $34 per share. The transaction is being structured to be a transaction not involving a public offering and, therefore, exempt under Section 4(2) of the Securities Act of 1933 and, in particular, Rule 146 thereunder.

The Staff has taken the position in the letter entitled "Familian Corp." (Avail. 5/3/76) that the "guarantee arrangement" involved therein constituted a put or other option within the meaning of Rule 144(d)(3)(A) and that, therefore, the holding period for both the original and the additional shares involved in the acquisition did not begin to run until the expiration of the "guarantee." As noted in the letter from counsel to Georgia-Pacific Corporation dated August 17, 1976, the Staff in Familian stated that the position taken in earlier letters dealing with contingent issues in acquisitions had failed to recognize the effect of arrangements described in those letters which eliminated the investment risk of the stockholders in the acquired corporations. In those cases, the transaction constituted a guarantee arrangement, the Staff stated, whereby stockholders of each of the companies being acquired were guaranteed a certain dollar amount which, in essence, was a put or option within the meaning of Rule 144(d)(3)(A). Therefore, the appropriate interpretation was that the holding period for the purposes of Rule 144 for both the original and additional shares did not begin to run until the expiration of the guarantee. The Staff, however, in response to Georgia-Pacific stated that the valuation procedure described by counsel to that company did not constitute a put or other option. It is my opinion that the same reasoning is applicable to the Weyerhaeuser valuation procedure.

Under the contemplated Weyerhaeuser arrangement, a stockholder of Oakdell may become entitled to receive up to a certain number of additional shares, but he is not guaranteed shares worth any specific dollar amount. If the market price of Weyerhaeuser Common Stock is not at an average level of $34 at the time of valuation (the closing price yesterday was $35), the stockholders will receive all of the additional shares, but no more. Thus, the stockholder will be at the risk of the market throughout the valuation period, both as to shares which the originally receives and as to the shares which may be issued in the future, and the reasoning of the Familian letter would not apply.

Therefore, it is my opinion that the holding period for the shares originally issued to the stockholder and for the shares contingently issuable to him should be deemed to commence at the time of the closing of the transaction between the Oakdell stockholders and Weyerhaeuser since Weyerhaeuser will then be committed to issue such shares subject only to conditions other than the payment of further consideration. Further, it is my opinion that the valuation procedure described above does not constitute a put or other option to dispose of Common Stock of Weyerhaeuser and, therefore, there will be no tolling of the holding period for any of the shares. I believe that these conclusions are specifically covered by paragraph (d)(3)(A) and paragraph (d)(4)(C) of Rule 144 and are also in accord with the philosophy and purposes thereof. Such a view is consistent with the Staff's views expressed in the responses to Georgia-Pacific (Avail. 9/24/76), and Savin Business Machines Corporation (Recon. avail. 10/21/76), among others. I would appreciate your advising (me whether you concur in this opinion.

It is anticipated that this transaction will close prior to July 15, 1977 and, therefore, your prompt attention to this request would be appreciated. It would also be appreciated if you could call the undersigned collect as soon as you have had an opportunity to consider this letter.

Very truly yours,

William J. Rainey

Attorney

WJR:bf

[STAFF REPLY LETTER]

July 26, 1977

William J. Rainey, Esquire

Weyerhaeuser Company

Tacoma, Washington 98410

Re: Weyerhaeuser Company

Dear Mr. Rainey:

This is in response to your letter of June 29, 1977 concerning the operation of subparagraphs (d)(3)(A) and (d)(4)(C) of Rule 144 under the Securities Act of 1933 (the "Securities Act") as applied to shares of common stock of the Weyerhaeuser Company ("Weyerhaeuser") issued pursuant to a Plan of Reorganization and Agreement (the "Agreement") with Oakdell, Inc. ("Oakdell"), Nursery B, Inc. ("Nursery B") and Jack and Joan Christmas.

You explain the material facts to be as follows. Oakdell will merge into Nursery B, the newly formed and wholly owned subsidiary of Weyerhaeuser. Under the Agreement at the closing scheduled for July 15, 1977, Weyerhaeuser will issue 51,243 shares of its common stock to the four shareholders of Cakdell, and will undertake in the event the market price of Weyerhaeuser common stock has not reached an average per share price of $38 during the period June 10 through 16, 1980, to issue up to an additional 7,205 shares of Weyerhaeuser common stock to the Oakdell shareholders. The exact number of additional shares issued will be based on a specified formula which you have set out in your letter.

It is your opinion that for purposes of Rule 144 the holding period for the Weyerhaeuser shares initially issued and for the shares contingently issuable to the Oakdell shareholders should be deemed to commence at the time of the closing of the transaction (1) since Weyerhaeuser will then be committed to issue such shares subject only to conditions other than the payment of further consideration; and (2) since the stockholder is not guaranteed shares worth any specific dollar amount and will be at the risk of the market throughout the valuation period. Further, it is your opinion that the valuation procedure for determining what, if any, contingent shares will be issued does not constitute a put or other option to dispose of common stock and, therefore, that there will be no tolling of the holding period for any of the shares.

Based on the facts presented, it is the view of this Division that the Weyerhaeuser shares issued pursuant to the agreement, including any shares issued as a result of the contingent provisions, will be deemed to have been issued on the closing date of the Agreement.

Because this position is based upon the representations made to the Division in your letter, it should be noted that any different facts or conditions might require a different conclusion. Further, this letter only expresses the Division's position on enforcement action and does not purport to express any legal conclusion on the questions presented.

Sincerely,

Consuela M. Washington

Attorney Adviser