Weyerhaeuser, Plum Creek merge to form $23 billion company, no word on Arkansas impact

Weyerhaeuser Company and Plum Creek, both companies with vast operations and long histories in Arkansas, announced on Sunday (Nov. 8) a deal to create the largest timber, land and forest products conglomerate with more than 13 million acres of timberland across the U.S.

At closing, the combined company is expected to have an equity value of $23 billion and annual earnings estimated at $2.2 billion, officials with both Seattle-based companies said. Combined, Weyerhaeuser and Plum Creek own nearly 1.3 million acres of Arkansas forestland.

ARKANSAS CONNECTIONS
It is not known how the deal with affect Weyerhaeuser and Plum Creek vast Arkansas operations, which together owns nearly 1.3 million acres of private forestland.

Weyerhaeuser first came to Arkansas in 1956. In 1969, the company bought Dierks Forest in the southwestern part of the state. The Arkansas branch of the company now has nearly 700 employees with locations in Dierks, Texarkana, Emerson and Hot Springs, and oversees 550,000 acres of forestland, according to a presentation given to the Arkansas Forestry Association at its annual meeting in September 2014.

In that AFA event in Hot Springs, Weyerhaeuser CEO Doyle Simons said the company planned to make a significant capital investment at its Dierks lumber mill in 2015.

Plum Creek is among the largest private landowners in Arkansas, with 711,000 acres of forestland in 22 counties. The company entered Arkansas in 1996 after an acquisition from Riverwood. While its core business is timber, Plum Creek also manages some of its lands for conservation, recreation, natural resources and community development.

According to the company’s Arkansas “fact sheet,” Plum Creek employs 45 people across the state and works with numerous contractors and customers in Arkansas. The Seattle, Wash.-based timberland real estate investment trust is also involved in Arkansas’ biomass and renewable energy industries, including being a major supplier of wood chips used for biofuels.

MERGER TERMS
Under terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Plum Creek shareholders will receive 1.6 shares of Weyerhaeuser for each share of Plum Creek held. Following closing, Weyerhaeuser and Plum Creek shareholders will own approximately 65% and 35%, respectively, of the combined company’s common stock.

Weyerhaeuser intends to execute a $2.5 billion share repurchase shortly after closing. The repurchase will result in a net financial impact on the company that is as if the deal were structured with approximately 70% stock and 30% cash. The combined company expects to maintain Weyerhaeuser’s annual dividend of $1.24 per common share, representing a 13% dividend increase to that received by Plum Creek shareholders.

Following the late Sunday afternoon announcement, top executives at the Washington State-based timberland real estate investment trust (REITs) were complimentary of each other and the game-changing deal that could set off a wave of consolidation as the industry attempts to move beyond a post-recession downturn that has lasted nearly eight years.

“With an extraordinary set of combined assets and the proven value creation records of both Weyerhaeuser and Plum Creek, the combined company will offer a compelling opportunity for shareholders,” said Plum Creek President and CEO Rick Holley. “These two companies are already best-in-class timberland managers with a relentless focus on sustainable resource management. 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 continued: “Doyle Simons and I share a commitment to disciplined capital allocation and sustained value creation, and I look forward to working together as we build a great new company.”

Simons, president and CEO of Weyerhaeuser, added: “We’re excited to combine the two leaders in our industry to create the world’s premier timber, land and forest products company. This new company will create tremendous benefit for shareholders as we drive value through shared best practices, economies of scale, cost synergies, operational excellence and disciplined capital allocation. Our customers and employees will also benefit as we form a winning team with common values and unparalleled expertise in timber, land and manufacturing.”

LEADERSHIP STRUCTURE
Under the combined company, Weyerhaeuser and Plum Creek said the economies of scale created by the timberland conglomerate would give the company the unique ability to capitalize on the housing recovery with an experienced management team, low-cost manufacturing assets, and a strong balance sheet with an investment grade credit rating. Altogether, there would be annual cost synergies from the deal of more than $100 million.

At closing, Doyle Simons will serve as president and CEO of the combined company, and Holley would serve as the non-executive chairman of Weyerhaeuser’s board, which will be expanded to 13 directors. Eight directors will be from Weyerhaeuser (including Simons) and five directors will be from Plum Creek (including Holley).

Other members of the executive team would include a mix of Weyerhaeuser and Plum Creek managers.

The transaction requires the approval of shareholders of Weyerhaeuser and Plum Creek and is subject to customary closing conditions. The transaction is expected to close in late first quarter or early second quarter of 2016. The combined company will retain the Weyerhaeuser name and continue to be traded under the WY ticker symbol on the New York Stock Exchange. As previously announced, Weyerhaeuser intends to move its headquarters to Seattle in mid-2016.

The management of both companies have scheduled a joint conference Monday morning, ahead of the opening bell for the abbreviated week of trading. U.S. stock markets will be closed on Wednesday in observance of Veterans Day. 

In a separate news release, Weyerhaeuser announced that its board of directors has authorized the exploration of strategic alternatives for its cellulose fibers business. Cathy Slater will continue to lead as senior vice president of Cellulose Fibers throughout the review process, officials said.