LionEye Capital Management Sends Letter to Wausau Paper Board

Urges Company to Hold Management Accountable
Plans to Vote for Change at Upcoming Annual Shareholders Meeting

PR Newswire

NEW YORK, Feb. 12, 2014 /PRNewswire/ -- LionEye Capital Management LLC today sent a letter to the Board of Directors of Wausau Paper Corp. (WPP) urging the Board to hold management accountable for recent performance.  The letter also stated that LionEye plans to vote for a change in the composition of the Board at the upcoming annual meeting.  LionEye has been an investor in Wausau Paper for over two years and owns 3.7% of the common shares outstanding.

Stephen V. Raneri, Chief Executive Officer of LionEye Capital said, "We have been a patient investor in Wausau Paper for 2½ years.  We believe that the Company has great assets and has the opportunity to create significant value for shareholders.  However, we believe that the current Board of Directors is unwilling or unable to take all necessary steps to maximize shareholder value.  Therefore, we believe that change in the composition of the Board, including the addition of shareholder representation, is in the best long-term interests of the Company."

The full text of the letter is attached:

February 12, 2014

Board of Directors
Wausau Paper Corp.
100 Paper Place
Mosinee, WI  54455-9099

Dear Members of the Board of Directors:

As you know, LionEye Capital Management LLC and its affiliated funds own 1.9 million shares of Wausau Paper Corp. ("WPP" or "the Company") which represents 3.7% of the common shares outstanding.  Our funds have been invested for over 2½ years and throughout this period we have been very patient in our interactions with you.  Our patience has run out.

Wausau Paper is facing its third proxy contest in three years.  We believe the reason is that the Board of Directors is not the focused, engaged, proactive steward of capital that the shareholders and the Company deserve. 

We have lost patience because the Board has been unwilling to hold management accountable for serious execution missteps.  Over the past two years, management has failed to deliver consistent operational performance and has routinely missed financial targets that they themselves set and communicated publicly.  Yesterday's reduction in guidance for 2014 is only the most recent example.  The same thing happened the quarter before.

Another example was when WPP management visited investors in September 2012, issued forward guidance and projected that the technical and specialty businesses would "earn the right to grow."  Just two weeks later, WPP revised guidance substantially lower and revealed much lower profitability and millions of dollars of losses at the Brainerd mill.  Months later, that mill shut down and was not even salable only two years after wasting $27 million in a futile effort to modernize the plant.  The remaining paper assets were sold to a private equity firm soon thereafter.

These sorts of snafus have become commonplace for WPP and we believe they demonstrate a profound lack of situational awareness and management competence.  In short, it is our view that management is not up to the task.

The latest challenge relates to the ATMOS machine and the introduction of the new premium products.  After investing more than $200 million of shareholder capital into the asset, we estimate that management is materially behind schedule delivering the expected financial benefits which were communicated publicly and when we visited Harrodsburg in August 2011.

For instance, in the early years, the machine was projected by management to deliver approximately $25 million in savings simply from insourcing parent-rolls.  Prior to the investment, the Tissue Segment EBITDA was $76 million in the 2010 base year.  Four years later, after investing more than $200 million, management just issued reduced guidance for 2014 EBITDA of just $60 to $70 million.  So far, there is little to show for the huge investment and a lack of transparency and communication about why.  Are you doing all you can to make sure the Company has the very best team available, located in the optimal location, to make sure we turn this around?  We believe the answer is no.

LionEye Capital Management is unwilling to tolerate representatives on the Board who sit passively while operational mistakes are committed and Wausau Paper's significant opportunities are squandered.  We have lost confidence that the Board will hold senior management accountable.  Therefore, we will hold you Board members to account and we expect the Company's other shareholders will do the same. 

As we wrote to you last September, we believe in the future of WPP.  That is why we must vote for change at the upcoming annual meeting.  We will not support the Company's incumbent slate of directors and we believe it is high time for a shareholder to be seated on the Board as well.

We look forward to the day when Wausau Paper Corp. becomes the truly world class firm that it deserves to be.


Stephen V. Raneri
Chief Executive Officer

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