Ancient Redwoods, Junk Bonds, and the Politics of Finance: A Study of the Hostile Takeover of the Pacific Lumber Company

Abstract

In 1986 Pacific Lumber (PL). the largest private owner of old-growth redwood trees, was acquired in a highly leveraged hostile takeover by MAXXAM Group. MAXXAM subsequently doubled the rate at which PL harvested its ancient redwoods, precipitating 10 years of environmental protests and intensive coverage in the national news media. This highly negative coverage almost universally blames the junk bond-financed takeover for the threat to PL's ancient forests, and thereby provides for many people unequivocal evidence of the distinctive impact of 1980s Wall Street greed. This paper provides contradictory evidence which establishes that the threat to PL's old-growth redwoods is not attributable to junk bonds, high leverage, or hostile takeovers. Our analysis of the media treatment of the PL takeover sheds light on the process through which the public came to hold strongly negative views of Wall Street in the wake of the 1980s wave of corporate rest rupturings.

JEL Classification: G31, G32, G34, Q32