Weyerhaeuser to Buy Longview Timber for $2.65 Billion

Weyerhaeuser Co. (WY), a U.S. real-estate investment trust that owns timberland, agreed to buy Longview Timber LLC for $2.65 billion including debt from affiliates of Brookfield Asset Management Inc. (BAM/A) in the third-largest forestry acquisition in North America.

The deal is expected to close in July and immediately add to Weyerhaeuser’s funds for distribution, the Federal Way, Washington-based company said yesterday in a statement. Weyerhaeuser plans to boost its quarterly cash dividend to 22 cents a share in September from 20 cents.

Weyerhaeuser, which also said that former Temple-Inland Inc. Chief Executive Officer Doyle Simons will take over as its CEO in August, will get about 645,000 acres (261,000 hectares) of timberlands in Washington and Oregon from buying Longview. The deal will boost the U.S. acreage that it owns or controls to about 6.6 million.

Weyerhaeuser is paying $4,109 per acre for the timberland, more than the estimated $3,200 per-acre value of the company’s existing lands in the Pacific Northwest, Paul Quinn, a Vancouver-based analyst at RBC Capital Markets who has a buy rating on Weyerhaeuser, said today in a note to clients.

“We believe the price is reasonable given the high-quality assets and over-mature timberland” that will allow Weyerhaeuser to accelerate its tree harvesting, Quinn said in the note.

Photographer: Andrew Harrer/Bloomberg

Weyerhaeuser Co. Chief Executive Officer Dan Fulton is set to retire this year. Close

Weyerhaeuser Co. Chief Executive Officer Dan Fulton is set to retire this year.

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Photographer: Andrew Harrer/Bloomberg

Weyerhaeuser Co. Chief Executive Officer Dan Fulton is set to retire this year.

About two-thirds of the trees on the Longview lands are Douglas fir, a species that commands a premium in exports markets, Weyerhaeuser CEO Dan Fulton said on a conference call today.

Deal Financing

Weyerhaeuser said it plans to finance the deal by raising about $2.45 billion through selling debt and equity and has a committed senior unsecured bridge loan facility with Morgan Stanley. It will offer 28 million common shares in a public offering, it said in a statement today.

The company will also offer 10 million mandatory convertible preference shares at a price of $50 per share, which will automatically convert into a variable number of common shares on July 1, 2016, it said in a separate statement. Morgan Stanley, Deutsche Bank AG. and Citigroup Inc. are managing the offerings, Weyerhaeuser said.

More details on the debt-financing terms will be released after the equity financing is completed, Patricia Bedient, Weyerhaeuser’s chief financial officer, said on the call.

Weyerhaeuser rose 1.3 percent to $28.66 in New York. The shares have gained 3 percent this year while the Dow Jones U.S. Real Estate Industry Group Index has climbed 4.9 percent.

Forestry Takeovers

The takeover is the largest forestry acquisition in North America after Resource Management Service LLC’s $5 billion purchase of International Paper Co. (IP) assets in 2006 and Plum Creek Timber Co.’s $3.34 billion acquisition of a timber business from Georgia-Pacific LLC in 2001, according to data compiled by Bloomberg.

The company said yesterday in a statement that Simons will take over Aug. 1 from Fulton, who will retire this year. Simons was chairman and CEO of cardboard-packaging company Temple-Inland for four years until its acquisition by International Paper Co. in 2012.

Weyerhaeuser said yesterday in another statement that it’s looking at options including a sale or spinoff for its Weyerhaeuser Real Estate Co. homebuilding and real estate development business.

Brookfield agreed to sell its Longview Fibre Paper and Packaging Inc. unit to KapStone Paper and Packaging Corp. (KS) for $1.03 billion in cash, the Toronto-based investment company said yesterday in a statement.

To contact the reporters on this story: Boris Korby in New York at bkorby1@bloomberg.net; Dan Hart in Washington at dahart@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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