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Weyerhaeuser Sets Stock Offer on Accord With Domtar

Weyerhaeuser Co., the world's biggest lumber producer, offered investors an 11 percent premium in a tender to exchange shares (WY) for a stake in the new Domtar Corp. (UFS)

The new company will combine Weyerhaeuser's fine-paper business and related assets with Domtar Inc. The offer of $1.11 in new Domtar shares for each $1 of Weyerhaeuser stock closes March 2. Weyerhaeuser, based in Federal Way, Washington, and Montreal- based Domtar announced the deal valued at $3.3 billion on Aug. 23.

The ``split off,'' still subject to regulatory approvals, is expected to be tax-free, Weyerhaeuser said today in a statement. Weyerhaeuser probably will have about 281 million shares of the new Domtar, or 55 percent, with the remaining 232 million shares held by the existing Domtar, Mark Connelly, an analyst at Credit Suisse Securities (USA) LLC said in a report.

Domtar, North America's third-largest maker of office paper, and Weyerhaeuser are combining assets in the production of paper for facsimile machines and photocopiers to reduce costs and balance North American output with demand.

Weyerhaeuser had planned to either spin off its stake in the new Domtar to investors or arrange a split off to give shareholders the option to exchange stock for new Domtar equity.

Investors now ``can choose to participate in the new Domtar or not,'' Weyerhaeuser spokesman Bruce Amundson said.

The exchange offer is limited to 11.1442 shares of Domtar per Weyerhaeuser share. The final ratio will be calculated on March 2. Weyerhaeuser declared a conditional dividend should the exchange offer be undersubscribed.

Shares of Weyerhaeuser rose 95 cents, or 1.3 percent, to $76.52 in New York Stock Exchange composite trading. They have gained 14 percent in the past year.

Domtar fell 16 cents, or 1.6 percent, to C$9.46 on the Toronto Stock Exchange. The shares still have jumped 59 percent in the past 12 months.

The split off is expected to reduce Weyerhaeuser's shares outstanding by about 10 percent, Richard Schneider, an analyst at UBS in New York, said in a report.

To contact the reporter on this story: Christopher Donville in Vancouver at pmckiernan@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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