The King of the Forest
If you inherited a family tradition, a million-acre forest, and a business, how would you decide which one to preserve? Meet Arthur Temple…
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Most mergers involve the swapping of stock between partners-to-be, so the first step was to get the company’s stock listed for public trading to establish its market value. Going public would also give the older generation a way to sell its holdings, and it would bring in some cash. Arthur hired Clifford Grum away from Republic-Bank to handle the details (Grum would eventually become his ambassador to Time Inc.), and in September 1969 Temple Industries was listed on the New York Stock Exchange. The public bought 800,000 shares at $25 per share, but the family retained 80 per cent of the stock.
The first serious suitor was Champion International, which had recently merged with U.S. Plywood. But the union never materialized Joe Dennan and other Temple officers went to the West Coast for three weeks and looked over their potential partners. They didn’t like what they saw. The prospective mates also started to squabble over money. When Denman returned home the merger was called off, and Arthur Temple turned his attention to Eastex, the paper manufacturing subsidiary started by Time Inc., in 1954.
The merger had a certain business logic—Temple shipped paper chips to Eastex, which in turn shipped sawlogs to Temple—but it was hard to imagine an emotional tie unless opposites could be said to attract. Arthur Temple’s target was the toughest, meanest, most hated timber company in all of East Texas. Eastex boss Mike Buckley, says Charlie Wilson, was “the most right-wing person I’ve known in my life, and I’m sure he would consider that a compliment.” His hatchet man, Ollie Crawford, was one of Austin’s most prominent and flamboyant lobbyists. As a company Eastex lived high and loved to fight. It brawled with local governments over taxes and with environmentalists over the proposed big Thicket National Preserve. Eastex lands were not only closed to hunters (always a point of contention between East Texans and the timber companies) but also fenced and patrolled by armed guards with dogs.
But it was the Big Thicket National Preserve that best illustrated the dissimilarity between the companies. Although he once called the Big Thicket “a varmint-infested swamp,” Arthur Temple was for it, for the same social reasons he had championed the Sam Rayburn Reservoir against Ernest Kurth. In 1967 he had persuaded the other timber companies, Eastex included, to observe a voluntary moratorium on cutting in the Thicket until the area to be set aside could be agreed upon. But Buckley and Crawford wanted the park limited to, as Charlie Wilson describes it, “thirty-five thousand of the worst acres in Texas.” The park’s backers wanted 100,000. Eastex threw all its corporate resources into the fight against the larger park, stirring up area civic clubs with lunchtime speeches warning of lost jobs. Finally Arthur Temple was able to persuade Buckley to agree to an 84,550-acre compromise that preserved the prize hardwood areas for the public and the best pine areas for the timber companies. It was engineered in Washington by Charlie Wilson, who had moved up to Congress in 1972, out of Arthur Temple’s employ but not out of his confidence.
When he wasn’t involved in politics or public relations, though, Mike Buckley knew how to run a paper mill. He had increased production at the mill in Evadale, north of Beaumont, fivefold in eleven years. Eastex was a well-conceived company, with 585,000 acres of timberland, the largest industrial nursery west of the Mississippi, and a line of consumer products that included stock for paper plates, paper cups, bakery boxes, and folding cartons. It made nothing for Time except money: 18 per cent of the total corporate revenues in 1972.
All that impressed Arthur Temple. So did the fact that Time was a diverse corporate creature, with divisions for magazines (Time, Sports Illustrated, Fortune, and subsequently People, Money, Discover, and a revitalized Life), video (local cable television systems and the Home Box Office cable network), book publishing, and forest products. If the merger could be brought off, he would have a piece of not only the long-sought paper mill but also of enterprises that didn’t depend on pine trees at all.
That summer Arthur and Buddy went for their drive in the woods. The father outlined his thoughts: the company and the family had reached a point of maturity…it was no longer a family company and for it to remain family owned didn’t make much sense…it was in postentrepreneurial stage…was the family ready to confront the issue? Buddy was certain that his father felt a merger was the right business decision and was looking for reinforcement. But then there were three generations of sentiment, and Arthur had to ask the decisive question: was Buddy ever going to want to come back into the business? To remain an independent company, Arthur said, it had to have a Temple.
Buddy knew his answer. “If I could have gone into the company at the time my dad did, I would have done it,” he says now. “He had a great time—inventing, designing, and building things. But by my time it was more structured, less entrepreneurial. Everything had to go through vice presidents. It wasn’t fun anymore. It wasn’t the right business decision either.”
Soon after their conversation Arthur Temple flew to the Bahamas to see a vacationing Mike Buckley. They had breakfast on a yacht, and Arthur raised the question of a merger, pointing out that the companies had been trading chips and trees for years. Buckley, approaching 65, knew that Time was worried about the future of Eastex after his retirement. Temple could take over and run it. “We’ve been sleeping together for years,” he said. “We might as well get married.”
MERGER WILL GIVE TEXANS 15% OF STOCK IN TIME INC. read the headline in the New York Times. The operative word was “Texans.” The Temple family was described as having “corralled” Time’s stock. Readers learned little about Arthur Temple’s business background, but a great deal about his Texan-like qualities: sunburned, six-foot outdoorsman…sometimes wears his golf cap when he works in his office…avid freshwater fisherman, deer hunter, and University of Texas football fan…college dropout. Other publications picked up the same theme. Dun’s Review, a business journal, described him as showing up for work wearing overalls. (It was a jump suit, says a still-miffed Arthur Temple, and besides, it was Saturday.)
Judging from the reaction, it almost seemed as if Temple Industries had bought Time instead of the other way around. The idea did have a quaint appeal: the owner of the Diboll Free Press (circulation: 4200) takes over Time magazine (circulation: 6 million); the largest stockholder changes from Henry Luce’s longtime crony Roy Larsen to Arthur Temple’s 84-year-old aunt, Mrs. Georgie Munz; the headquarters moves from New York City (population: 8 million) to Diboll (population: 5000).
In retrospect, it is clear that the merger came at Time’s nadir—Life had just folded—and Temple’s peak. In 1973 Time had just launched Money and was still testing People. Video was reporting nothing but losses then; now it outperforms all the company’s magazines combined. The company’s profits weren’t dazzling, but its sales totaled more than half a billion dollars, while Temple’s had never reached $100 million. Time had turned the corner without the financial community’s realizing it; when Dun’s asked in its headline, CAN ARTHR TEMPLE FINALLY BRING A BIG WINNER TO TIME? The right answer was that the winners were already there. And when the New York Times wondered “just how much power the Temple people will wield, or try to wield,” the right answer was…as a rebel faction, none.
But the financial community was convinced otherwise. When the merger was announced in February 1973, Time’s stock was trading at 52 ¾. By the time the agreement (giving Temple shareholders one-half share of Time for each full share of Temple) was officially approved in August, the price had tumbled to 30 ½. Institutional investors in particular were dismayed by the union; an analyst from one of the big Wall Street firms told the Times, “It’s hard to figure out if Time wants to be a forest products company or a communications company.” Because the analysts knew nothing about the forest or Mike Buckley or trading sawlogs for paper chips, they did not understand why Time wanted Temple; thus they misinterpreted the merger as Temple’s going after Time. The nose dive of Time’s stock was an unmistakable message to the Texans: try to make Time into a forest products company and this is what will happen to your holdings.
As part of the merger agreement, Temple shareholders received 2 of the 17 slots on Time’s board of directors—one for Arthur, the other for Temple Webber. (Today, they have 3 of 24). Arthur became chairman of the board’s planning and policy committee. After Georgie Munz and Roy Larsen, the third-and fourth-largest shareholders were Temple Webber and Arthur Temple. Clifford Grum went to New York to become the treasurer of Time Inc. He has stayed on the fast track and currently is executive vice president, a job that in effect makes him chief operating officer, although Time does not use that description.
In East Texas, Arthur Temple was president and chief executive officer of Temple-Eastex, while Mike Buckley was chairman of the board. Temple was the boss; one of his first acts was to transfer Ollie Crawford to Diboll and render him harmless. Arthur stayed on until 1977, by which time most of the details of merging the two timber operations had been worked out. The presidency passed out of the Temple family forever that year, to Joe Denman, with Arthur keeping the chairmanship he had assumed when Buckley retired in 1975. In 1978 Arthur Temple was named vice chairman of Time Inc. , his current title.
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