Weyerhaeuser Buying Plum Creek, Creating $23B REIT

Weyerhaeuser Company announced that it has agreed to buy Plum Creek Timber Co. for about $8.4 billion, merging to create a timber, land and forest products company with an equity value of $23 billion, based on current share prices. The new company will own more than 13 million acres of timberland across the U.S., operating under the Weyerhaeuser name and ranking sixth among publicly traded companies based in Washington state. Plum Creek shareholders will receive 1.6 shares of Weyerhaeuser stock for each Plum Creek share held, with Weyerhaeuser holders owning about 65% of the combined company's common stock. Doyle Simons, the president and CEO of Weyerhaeuser, will continue to serve as president and CEO of the new company.

"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 Rick Holley, chief executive officer for Plum Creek, who will be a non-executive chairman at Weyerhaeuser. "These two companies are already best-in-class timberland managers with a relentless focus on sustainable resource management."

Analysts said it's an epic consolidation move in an otherwise fragmented industry. "In the private timberland industry, they become a Goliath," said Steven Chercover, a senior research analyst at brokerage D.A. Davidson & Co. "This couldn't get any bigger." Chercover said he'd expect the companies to cut a big chunk of duplicated overhead costs.

"We're excited to combine the two leaders in our industry to create the world's premier timber, land and forest products company," said Doyle Simons, president and chief executive officer of Weyerhaeuser. "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."

Weyerhaeuser, based in Federal Way, Washington, also said that it may spin off its cellulose fibers business, which includes five pulp mills. For more news and information visit Blumberg Partners.