||Doyle R. Simons|
||Chairman and Chief Executive Officer|
June 4, 2011
Mr. John V. Faraci
Chairman and CEO
6400 Poplar Avenue
The Board of Directors of Temple-Inland has received your letters dated May 19 and May 27,2011 containing IPs proposal to
acquire all of the outstanding shares of Temple- Inland for $30.60 per share in cash. The Board has also considered the additional information you provided me at our meeting held at your request on May 26. Earlier today, the Temple- Inland
Board of Directors convened and carefully reviewed your companys proposal with the assistance of its financial advisor, Goldman, Sachs & Co., and its legal counsel, Wachtell, Lipton, Rosen & Katz. After thorough
consideration, it is the unanimous view of the Temple- Inland Board of Directors that your unsolicited proposal grossly undervalues Temple-Inland and its future prospects. Accordingly, the Temple-Inland Board unanimously rejects IPs proposal
of $30.60 per share.
Since we launched the new Temple-Inland in January 2008, we have delivered superior results
to our stockholders compared with our corrugated packaging peers (including IP), building products peers, and the S&P 500. Since that time, our total returns to stockholders of 22% greatly exceed the 5% total return that IP has achieved. Through
our proven ability to execute our strategy focused on maximizing return on investment (ROI) and profitably growing our business, the Board believes the Company will continue to provide superior results for our stockholders.
A key part of our strategy is to maximize ROI, because we believe ROI is fundamental to driving stockholder value. In corrugated
packaging, we generated record ROI of 16.5% in 2009 and 2010 and are positioned to generate significantly higher levels of ROI in 2011 and beyond due to fundamental changes in the industry and benefits from our box plant transformation. Indeed, we
are now achieving the highest returns on assets in the corrugated packaging industry. Despite the worst housing markets since the Great Depression, our low-cost building products operation has continued to generate positive cash flow throughout the
downturn and is positioned to generate very high levels of return for our stockholders when housing markets recover. As the economic recovery continues and the benefits from our strategy continue to be realized, it is the stockholders of
Temple-Inland who should benefit from our companys very strong prospects, not the stockholders of IP.
1300 S. MoPac Bpy., 3rd
Floor Austin, Texas 78746 512.434.3737 Fax 512.434.3750
Mr. John V. Faraci
June 4, 2011
We take issue with a number of claims in the materials you have provided to us.
You have overstated our net debt by $91 million (which was $737 million as of March 31, 2011, rather than the $828 million stated in your proposal) and the net present value of our timber finance liability by at least $200 million. More
significantly, the comparable transactions you cite are simply not comparable those transactions involved troubled or struggling companies or operations rather than a company such as Temple-Inland with its industry-leading
returns, high-quality assets and low-cost structure. Further, the retrospective focus of these comparables does not take account of the profound changes that are occurring in the corrugated packaging industry, which have led to reduced
pricing volatility, higher average prices and widely-held expectations that these positive industry trends will continue.
Your own public statements acknowledge the changes in the industry and make clear that looking back at history is not the
correct way to understand the corrugated packaging industrys future. If, as you so clearly state, the past is not prologue for your company, neither is it for ours. We believe that it is for this reason that your letter of May 27
insistently says Timing and speed are important, and you have threatened us with a hostile bid if we do not respond by your deadline. The speed that is important to you underscores an opportunistic attempt to deprive our
stockholders of the value in their company that we believe will become increasingly evident as the benefits of profound change in the corrugated packaging industry, Box Plant Transformation II and our extremely low-cost building products business
accrue to the benefit of our stockholders. Finally, the certain value you refer to overlooks the serious regulatory issues of your proposal, an attempt to forcibly combine the #1 and #3 participants in the corrugated packaging industry
with the result that your company would have an approximate 40% share of industry capacity, nearly double the next largest competitor.
Our Board of Directors, our management team and our employees are dedicated to creating value for all of our stockholders, which we expect to do by continuing to effectively execute on our strategic plan.
/s/ Doyle R. Simons
Doyle R. Simons