Deltic Timber shares touch 52-week highs after unsolicited offer is revealed

Shares of Deltic Timber touched a 52-week high Wednesday after a Memphis-based investment firm said it and the El Dorado-based natural resources and timberland company were approached by “multiple parties interested in merger or acquiring” Deltic.

Deltic’s stock (NYSE: DEL) shot up 10% in trading on the previous day in trading after Southeastern Asset Management of Memphis publicly disclosed that its stake in the company had grown to 1,827,558 shares of common stock, which represents 15% ownership in the company that was spun off by Murphy Oil Corp. in late 1996. Deltic shares were trading around $82 early Thursday morning. During the past 52 weeks the share price ranged between an $85.49 high and a $53.21 low.

In its filing with the federal Securities and Exchange Commission, Southeastern said it switched from a so-called Schedule 13G designation to a 13D because it wanted to play a bigger role and possibly participate in talks to help Deltic build “intrinsic value per share or to cause the company’s true economic value to be recognized.”

A Schedule 13D is commonly referred to as a “beneficial ownership report,” and includes any person who directly or indirectly shares voting or investment power of more than 5%. Depending upon the facts and circumstances, the person or group of persons may be eligible to file the more abbreviated 13G in lieu of 13D – which oftentimes includes information concerning acquisitions and other information filed in connection with a tender offer.

So “it is our understanding based on conversations with Deltic’s senior management and other parties that Deltic has hired a financial advisor but refuses to enter into substantive negotiations with these potential partners that are willing to pay a price for Deltic in excess of current trading levels,” said Southeastern, now Deltic’s top institutional stockholder with a $140 million stake in the Arkansas company.

Southeastern is a $35 billion employee-owned investment management firm led by noted off-Wall Street value investor Otis “Mason” Hawkins. The Memphis billionaire also heads Longleaf Partners Fund, a small cap mutual fund vehicle that holds most of Deltic’s shares.

The unsolicited offer comes at a time when REITS – Real Estate Investment Trusts – are under pressure as the timber industry continues to struggle from a post-recession downturn that has lasted nearly 10 years. Exactly a year ago, Weyerhaeuser Company and Plum Creek, both companies with vast operations and long histories in Arkansas, completed a deal to create the largest timber, land and forest products conglomerate with more than 13 million acres of U.S. timberland. At closing, that combined company is expected to have an equity value of $23 billion and annual earnings estimated at $2.2 billion, officials said. Combined, Weyerhaeuser and Plum Creek own nearly 1.3 million acres of Arkansas forestland.

Besides Weyerhaeuser, Jacksonville, Fla.-based Rayonier and Potlatch Corp. of Spokane, Wash., are also timber REITs that have expressed interest in growing their reach across the Southeastern U.S. Potlatch recently spent $3 million to install a new stacker at its paper mill in Warren and owns nearly 410,000 acres of forestland in Arkansas.