Ancient redwoods and the politics of finance: The hostile takeover of the Pacific Lumber Company

Abstract

Pacific Lumber was acquired in 1986 by MAXXAM, whose decision to double PL's harvest of old-growth redwoods precipitated 11 years of environmental protests. Intense media coverage blames the Drexel-financed takeover for threatening Headwaters Forest, the largest privately owned ancient redwood forest. This ‘Wall Street greed’ portrayal aroused such public outrage that the Clinton administration agreed to pay $380 million for Headwaters weeks before the 1996 election. We establish that the threat to Head-waters is not attributable to MAXXAM's junk bond-financed takeover. Government's response to dramatic crises encourages interest groups to use emotional appeals to influence resource allocation.