Weyerhaeuser Buys Plum Creek to Form World’s Largest Timber Company

10 Nov, 2015

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On Sunday, the Weyerhaeuser Co (NYSE:WY) spokesperson announced that the company would be buying for 8.4 billion dollars. The statement was released jointly by both the companies. The acquisition of Plum Creek by Weyerhaeuser makes the deal one of the largest in the timber sector. The merger will result in the company owning over 13 million acres of private land which will be used for the construction market. According to the merger, Weyerhaeuser will hold 65 percent of the companies stick while Plum Creek shareholders will hold 1.6 shares of Weyerhaeuser stock on each Plum Creek share.

Company valuation

The company has been valued at an equity value of 23 billion dollars which will rank it at the sixth largest amongst publicly traded companies in the state of Washington. Weyerhaeuser has maintained that they will continue according to schedule for the payment of dividends this year at the rate of 1.24 dollars per share.

Most analysts have cited the move to be one of the much needed consolidation moves within the fragmented industry. "Both companies has historically looked to grow their timberland resource asset base, in other words, to acquire more timberlands, so here's an opportunity for both of us to accomplish that," said the Plum Creek Chief Executive Officer Rick Holley. Rick Holley will become the company’s non-executive chairman.

The merger will be a proponent for the Plum Creek management to break new ground into the real estate and asset management sector too. Plum Creek has primarily been involved in the timber market, while Weyerhaeuser has traditionally focused on the real estate and construction markets ever since its inception in 1900. The company has also discovered the publicly traded market of asset management, and will be a supporting force for the Plum Creek management to enter the same game after their merger.

The company aims at entering the asset management market on a large scale and plans to open investment opportunities globally. The company also plans to execute a 2.5 billion dollar share repurchase program soon after the deal closure. The synergy costs are expected to go up to 100 million dollars.

Cost cutting measures will be an inevitable function of the merger, however, the exact number of jobs have not been announced yet. Simons, the CEO of the company, was also quoted as saying that while there will be a reshuffle in the management, the exact jobs have not yet been decided.

Financial and legal counsel

Morgan Stanley (NYSE:MS) served as the financial advisor for the deal while Swain & Moore served as legal counsel for Weyerhaeuser. On the other hand, Goldman Sachs Group Inc (NYSE:GS) along with Merrill Lynch Preferred Capital Trust V (NYSE:MER-F) provided financial counsel and Skadden, Arps, Slate, Meagher & Flom LLP provided legal counsel on the merger.

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