New $23 bln woodland monster looks good on paper

Plum Creek owners will receive 1.6 Weyerhaeuser shares for each Plum Creek share they now own. The deal would allow the combined company to take advantage of economies of scale and capitalise on the United States housing recovery.

The Weyerhaeuser-Plum Creek merger could cost nearly $8.44 billion based on Plum Creek’s outstanding shares of about 174 million and Weyerhaeuser’s closing price of $30.40 on Friday.

Plum Creek has been working in recent years on a massive residential and commercial development project in eastern Alachua County, and a spokesman for the company said those plans remain intact. A combination would create a $23 billion lumber behemoth. That implied a price for Plum Creek about 14 percent higher than its average share price over the past month. Plum Creek’s third-quarter earnings stood at $100 million.

Holley said that combining the two companies, which operate as real estate investment trusts and are popular with asset managers seeking to hold timber in their portfolios, will be able to attract larger investors both at home and globally. “We continue to make strong progress in our efforts to reduce the size of GE Capital”, said Keith Sherin, GE Capital’s chairman and CEO.

Weyerhaeuser, based in Federal Way, Washington, also said Sunday that it may spin off its cellulose fibers business, which includes five pulp mills.

Plum Creek, which owns almost 6.2 million acres of timberland, now has a market capitalization of almost $7 billion, while Weyerhaeuser, which owns $6.9 million acres of timberland across the country, is valued at $15.5 billion.

Holley and Weyerhaeuser’s chief executive, Doyle Simons, told Reuters that they did not foresee any regulatory or shareholder obstacles to the deal, which they expect to close late in the first quarter or earlier in the second quarter of 2016. In Florida, Plum Creek’s holdings of mostly pine forests are in 18 counties though concentrated in Levy, Union and Alachua counties.

Weyerhaeuser’s financial adviser on the takeover is Morgan Stanley and its legal counsel is Cravath, Swaine & Moore LLP.