NAPERVILLE, Ill. -- OfficeMax has received approximately $129 million in cash proceeds related to its October 2004 investment in Boise Cascade Holdings, L.L.C. Since 2004, OfficeMax has held two classes of securities in BCH, non-voting equity securities ("Series A Units") and voting equity securities ("Series B Units").
BCH will redeem all of the Series A Units held by OfficeMax for $112 million, equal to the original investment amount of $66 million plus $46 million of total accrued dividends. As previously disclosed, OfficeMax had been recording income earned from the 8% annual dividend yield on the Series A Units as a reduction of operating, selling and general and administrative expenses in its Corporate & Other segment. This dividend income ceased upon completion of the redemption of the Series A Units on Feb. 12.
OfficeMax also continues to hold a 20.4% ownership interest in the Series B Units of BCH, which do not accrue any dividend. OfficeMax has accounted for the Series B Units under the cost method as a $109 million investment on its consolidated balance sheet since October 2004. BCH has declared a distribution of approximately $85 million payable on Feb. 12 to the holders of its Series B Units, of which OfficeMax's share of proceeds is approximately $17 million. This distribution on the Series B Units will be recognized as income by OfficeMax and will not reduce the $109 million investment amount.
Ravi Saligram, president and CEO of OfficeMax said, "We're very pleased to have monetized a portion of this non-core Boise asset. Together with the removal of the Lehman-backed timber notes and reducing the unfunded pension liability, we have made great strides in optimizing our balance sheet over the past several months. We are considering the best way to utilize these proceeds to maximize shareholder value."
Following the redemption of the Series A Units and the distribution on the Series B Units, BCH will continue to hold approximately $28 million of cash and own 29,700,000 common shares of Boise Cascade Company (BCC), which completed its initial public stock offering today.
Bruce Besanko, EVP, CFO and chief administrative officer of OfficeMax said, "Following the receipt of these proceeds, we'll retain our BCH Series B Units which represent an indirect ownership interest of approximately 6 million shares or approximately 14% of the common equity of Boise Cascade Company."
OfficeMax has carried a $180 million deferred book gain on its consolidated balance sheet related to its investment in BCH in October 2004. The redemption of the Series A Units is expected to trigger recognition of a pre-tax operating gain of approximately $68 million representing the portion of the deferred gain attributable to the Series A Units. The remaining $112 million of deferred gain attributable to the Series B Units will remain on OfficeMax's consolidated balance sheet until such time as the Series B Units are sold or redeemed. OfficeMax does not expect it will be required to pay any cash taxes as a result of the redemption of the Series A Units and the distribution on the Series B Units.