SPOKANE - Potlatch Corporation announced Monday that its Board of Directors has given final approval to the spin-off of its pulp-based businesses. The spin-off will be called Clearwater Paper Corporation.

The board established the close of business on December 9 as the record date and set a distribution ratio of one share of Clearwater Paper stock for every 3.5 shares of Potlatch Corporation stock. The distribution of Clearwater Paper common stock will take place on December 16.

Potlatch has received a ruling from the IRS that the spin-off will qualify as a tax-free distribution to Potlatch and its shareholders for federal income tax purposes.

Clearwater Paper common stock is expected to begin regular way trading on the New York Stock Exchange under the ticker "CLW" on December 17. Potlatch will continue to trade on the New York Stock Exchange under the ticker "PCH." On the first day of trading following the distribution date, all shares of Potlatch common stock will trade on an "ex dividend" basis without the benefit of the Clearwater Paper common stock distribution.

"From the beginning of this process, our objective was to enhance long-term value for shareholders by providing them with ownership in two focused companies - an essentially pure-play timber-REIT and a solidly-positioned pulp-based manufacturing company - and we are very pleased to be near the culmination of those efforts," said Michael J. Covey, chairman, president and CEO of Potlatch. "We believe that separating these businesses will present both companies with more opportunities to maximize their potential as independent entities, while affording each business the flexibility to be more responsive to changing industry and economic dynamics. "We believe this action will offer the investment community greater insight into each business so that it can better evaluate the merits and future prospects of Potlatch and Clearwater Paper. The spin-off will also enable the management teams and Boards of both companies to provide more efficient, focused leadership and oversight of their respective core businesses, and to take advantage of value-creation opportunities for both companies over the long-term."

Potlatch said its dividend policy has been driven primarily by the performance of its timber and land-based businesses since the company converted to a real estate investment trust in 2006. No change in policy is expected following the spin-off. The fourth quarter 2008 dividend will be declared by the Potlatch board of directors on December 5.

"There are many benefits to operating Clearwater Paper as a stand-alone company and we expect the spin-off to provide increased opportunities for investors, employees and customers over the long-term," said Gordon L. Jones, who will assume the role of president and CEO of Clearwater Paper upon the spin-off. "The experienced Clearwater Paper management team is in place and excited about working to realize the full value of this pulp and paper based business."

In connection with the spin-off, Clearwater Paper will be retaining the obligation to pay the interest and principal on $100 million principal amount of debentures previously issued by an affiliate of Potlatch Corporation that will become due and payable in full in December 2009. In addition, Clearwater Paper intends to immediately draw $50 million from its anticipated $125 million revolving credit facility and transfer that amount to a subsidiary of Potlatch Corporation. As a result, Clearwater Paper will have $150 million principal amount of debt outstanding.

Clearwater Paper expects to pay cash dividends on its common stock. The declaration and amount of any dividends will be determined by its Board of Directors.
No action is required by Potlatch shareholders to receive their Clearwater Paper common stock and Potlatch shareholders will not be required to surrender or exchange their shares.

Completion of the distribution is subject to customary conditions set forth in a separation and distribution agreement filed with the U.S. Securities and Exchange Commission (SEC) as an exhibit to Clearwater's information statement on Form 10.

Potlatch said it will mail an information statement regarding the spin-off to all holders of Potlatch common stock, which will include information regarding the procedures by which the distribution will be effected, the business and management of Clearwater Paper following the distribution, and other information of interest to Potlatch and Clearwater Paper shareholders.