Timber REITs Weyerhaeuser, Plum Creek Agree to Merge

Timber REITs Weyerhaeuser (NYSE:  WY) and Plum Creek (NYSE: PCL) said Nov. 8 that they have agreed to merge, creating a combined company with a current market value of $23 billion.

The new company will retain the Weyerhaeuser name and ticker symbol.  It will be the largest private owner of timberland in the United States, the companies said, with assets of more than 13 million acres. The companies also said they expect to realize annual cost synergies of $100 million.

Doyle Simons, current president and CEO of Weyerhaeuser, will serve as president and CEO of the new company. Plum Creek CEO Rick Holley will serve as non-executive chairman. The transaction is expected to close in the late first quarter or early second quarter of 2016.

“The breadth and diversity of our combined land and timber assets uniquely position the new company to capitalize fully on the improving housing market, continue to capture higher and better use land values across the combined portfolio, and create additional opportunities to build lasting value,” Holley said.

Under the terms of the deal, Plum Creek shareholders will receive 1.60 shares of Weyerhaeuser for each share of Plum Creek held. This represents a premium of 13.8 percent to a weighted average of Plum Creek shares to Weyerhaeuser shares, according to the companies.

Weyerhaeuser Shareholders Will Own 65 Percent of New Company

Once the deal is closed, Weyerhaeuser shareholders will own approximately 65 percent of the combined company’s common stock, with Plum Creek shareholders owning 35 percent.  Weyerhaeuser said it intends to execute a $2.5 billion share repurchase shortly after closing.

Analysts said they were intrigued by the long-term value creation possibilities that Simons could bring to the expanded platform.

“Making the deal work will require that Weyerhaeuser retain Plum Creek’s strong field foresters and the firm’s capital-savvy approach to timberland management. A strong and active presence by Rick Holley on the Weyerhaeuser board should help that process,” said Mark Wilde, analyst at BMO Capital Markets Corp.

Collin Mings, analyst at Raymond James, noted that the three other timber REITs, CatchMark Timber Trust, Inc. (NYSE: CTT), Rayonier Inc. (NYSE: RYN) and Potlach Corp. (NASDAQ: PCH) could receive a near-term bounce on thoughts that more mergers and acquisitions activity is on the horizon. However, Weyerhaeuser - the most logical acquirer – “will be sidelined for the near/intermediate term digesting the Plum Creek portfolio,” Mings added.

Separately, Weyerhaeuser said it has authorized the exploration of strategic alternatives for its Cellulose Fibers business. Operations include five pulp mills, two modified fiber mills, one liquid packaging board facility, and one publishing papers joint-venture facility.