HMC Bids for Timber Company

Harvard Management Company (HMC), which manages the University’s $35 billion endowment, made an offer late last week to take over a lumber company holding over 200,000 acres of forest in California—enough timberland to cover Cambridge 48 times over.

The offer places Harvard in a bidding war over the bankrupt Pacific Lumber Company. A deal for Pacific Lumber would deepen the University’s already extensive forestry holdings, which are valued in the billions of dollars.

Marathon Asset Management, a competitor for the lumber company, had previously offered to pay $530 million to Pacific’s bondholders.

Citing HMC’s policy to not discuss specific investments with the press, University spokesman John D. Longbrake would only confirm that Harvard has “expressed interest in acquiring the forest assets.”

“But the matter is before the bankruptcy court,” he said, “and until the judge rules on competing plans, we have no further comment.”

The Associated Press reported that Harvard maintains forestry holdings worth upwards of $5 billion, but Longbrake said that the figure “does not accurately reflect [HMC’s] timber portfolio.”

The state of the bidding is still unclear, but Harvard does have the advantage of having a large, stable pool of capital, unlike other investment firms, who have to contend with the possibility of investors pulling their money.

And a firm bidding for a bankrupt company like Pacific Lumber would have a greater need for a steady capital source in order to meet the acquired company’s obligations. The recent “credit crunch” has reduced the number of firms that would have access to such capital.

In a 2004 interview, former HMC chief executive Jack R. Meyer attributed Harvard’s sizable lumber holdings to the fact that lumber hedges the risk of more traditional investments.

“We think that timber is quite attractive to what other asset classes have to offer,” said Meyer, who left the next year to form a Boston-based hedge fund. “[Timber] is also a good diversifier since its returns will not correlate closely with returns from equity markets.”

Harvard only has to make public its holdings in companies traded on American stock exchanges, which it does through quarterly filings with the Securities and Exchange Commission.

The University does not make available information about its other assets, like those in natural resources, hedge funds, or those that are traded on foreign exchanges.

Officials from Pacific Lumber did not return repeated requests for comment.

—Staff writer Clifford M. Marks can be reached at cmarks@fas.harvard.edu.

—Staff writer Nathan C. Strauss can be reached at strauss@fas.harvard.edu.