Hammermill Rejects Offer From Bilzerian : Paper Company Says It Will Sue to Thwart Bid

NEW YORK — Hammermill Paper Co., the nation’s 12th-largest forest products company, said Sunday that it has rejected a $52-a-share takeover offer by Bilzerian & Mack Associates.

The group vying for Hammermill, headed by California investor Paul Bilzerian, had offered last month to pay $722 million for the balance of Hammermill’s outstanding shares after already buying a 20% stake in the company.

“With the advice of investment advisers, it was determined that it was not adequate and not in the best interests of the shareholders,” said Jim Fingeroth, a spokesman for Hammermill.

In a statement, the Erie, Pa.-based company said “the board of directors recommends that the company’s shareholders reject the Bilzerian/Mack offer and not tender any of their shares pursuant to the offer. In reaching its conclusion, the board of directors considered a number of factors, including the opinions of Morgan Stanley & Co. and the First Boston Corp., the company’s financial advisers.”

Will Explore Alternatives

The company said it planned to file a suit today in U.S. District Court in Erie to prevent the takeover group from purchasing any more of the company’s shares.

The statement added that “the board has also determined to explore and investigate a variety of transactions and, to that end, has instructed management to work with its financial advisors to develop all alternative courses of action which would protect the best interests of the company and its shareholders, employees, suppliers and customers, and the communities in which the company conducts its businesses.”

The company’s stock closed at $55.87 1/2 a share on Friday, up $1.75.

Hammermill, which has about 13,000 employees, makes printing and packaging papers and owns or controls about 440,000 acres of timberland. It earned $28.9 million on sales of $1.88 billion last year.