Weyerhaeuser and Plum Creek announce agreement leading to creation of new timberland company

Timberland owned by Plum Creek Timber Co, the largest private U.S. landowner, is seen near Jackman, Maine, May 25, 2012. Timber harvesters like Plum Creek are expected to be helped by a recovery in U.S. housing demand during the next two years. Picture taken May 25, 2012. REUTERS/Ernest Scheyder (UNITED STATES - Tags: ENVIRONMENT BUSINESS CONSTRUCTION) - RTR33ARM

Two renowned companies, Weyerhaeuser and Plum Creek Timber, have announced the formation of a new timber, land, and forest products company of 23 billion dollars, which could possibly become the largest company in the United States. With their mutual consent, they have agreed to run this venture with the same name of the former, which will manage a very large area of timberland. With the creation of this new company, the emphasis will be to stabilize the financial condition of the US logging industry.

The two leading proprietors of the United States agreed to this merger.

During a telephone interview, the chief executive officer of Plum Creek, Rick Holley, showed interest in buying more land to establish a timber company. Similarly, the Weyerhaeuser Company sought to grow their timberland base. These circumstances led both companies to set up a larger proportion of territory for timberland.

Under the rules of the contract which they have signed, Plum Creek Industry will get a lower quota compared to the shares of Weyerhaeuser Company. Overall, the premium percentage, according to the ratio of Plum Creek shares to Weyerhaeuser shares, is 13.8.

174 pending shares of Plum Creek Industry could raise total transactions to the cost of $8.4 billion, while the closing price of another industry could be $30.40. The value of the new, combined industry could reach23 billion dollars, but Plum Creek could not confirm these figures.

The CEO of Plum Creek, Holley, commented that amalgamation of both companies could be attributed to common interests in the timber industry. Additionally, this new company will help them to make many other national and international deals. Holley said, “If an investor wants to endow their money, this company is a right place and it is worth enough for them.”

Holley and Weyerhaeuser’s chief executive officer, Doyle Simons, ensured that not a single obstacle would stand in the way of any shareholders. Unanimously, the panels of both the companies have backed the union.

Holley will play a role of non-executive chairman of Weyerhaeuser’s jury. Simon said the amount of this interaction could be 100 million dollars, but there would be wide range of varying synergies. Weyerhaeuser plans enterprises in the business of fiber industry, while Simon divulged that the procedure was solid in its initial stage. He refused to share to what degree the business was successful. The Washington-based Weyerhaeuser governs 6.9 million acres, while Plum Creek manages 0.7 million acres less.

Weyerhaeuser is determined to achieve a 2.5 billion dollar share program for further purchases after completion of contract. The aggregate fiscal impact would occur if the deal offered 70% stock and 30% cash, said the company. This agreement could possibly increase the current dividend of Plum Creek by 30%. Weyerhaeuser’s current dividend is $1.24 per common share per year.

Morgan Stanley is appointed as financial advisor, and Cravath, Swaine & Moore is nominated as legal counsel for Weyerhaeuser. Goldman Sachs is lead financial advisor of Plum Creek industry. Bank of America Merrill Lynch is Plum Creek’s financial advisor, while Skadden, Arps, Slate, Meagher & Flom LLP serve as legal counsel.

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