Two of the largest timberland owners in the United States, Weyerhaeuser Co. and Plum Creek Timber Co. Inc., are reportedly merging to create a gigantic timber company worth $23 billion. As announced on Sunday, Weyerhaeuser will acquire Plum Creek in an $8.44 billion deal.
Under the terms of the multibillion merger, the new company will keep Weyerhaeuser's name. It will also manage more than 13 million acres of timberland, which will allow the company to drive economies of scale and capitalize on the housing recovery in America. Additionally, Plum Creek's shareholders will receive 1.60 Weyerhaeuser's shares for each Plum Creek share, Reuters noted.
"Both companies have historically looked to grow their timberland resource asset base, in others words to acquire more timberlands, so here's an opportunity for both of us to accomplish that," Plum Creek Chief Executive Officer Rick Holley said in a telephone interview.
The Weyerhaeuser-Plum Creek merger could cost almost $8.44 billion based on Plum Creek's outstanding shares of about 174 million and Weyerhaeuser's closing price of $30.40 on Friday. While the joint equity of the companies would amount to $23 billion. However, the figure has not been confirmed.
Known to operate as real investment trusts and are famous with asset managers pursuing to hold timber in their portfolios, Weyerhaeuser and Plum Creek's merger will be able to lure larger investors worldwide, said Holly, who will serve as Weyerhaeuser's board's non-executive chairman.
"We saw a unique opportunity to combine the two industry leaders in a way that will generate substantial value for shareholders by creating the world's premiere timberland and forest products company," Weyerhaeuser CEO Doyle Simons, who will be merging company's president & CEO, said in an interview Sunday, as per The Seattle Times.
Speaking of the merger, both Plum Creek, which has 1,200 employees, and Weyerhaeuser, which has 12,800 employees globally, were asked about layoffs. And Simons addressed the issue, saying there will be "some overlap in terms of people" but stressed that it's too early to estimate how many positions will be eliminated.
As Seattle-based Plum Creek's 6.2 million acres of timberlands will combine with Weyerhaeuser's 7 million acres, the merger will spawn into one of the world's largest private timberland owners.
"The breadth and diversity of our combined land and timber assets uniquely position the new company to capitalize fully on the improving housing market," Holley in a statement.
Washington-based Weyerhaeuser also said Sunday that the company may spin off its cellulose fibers business, which includes five pulp mills. It also announced its plans to move the company headquarters to Seattle in the middle of next year, U.S. News reported.
Meanwhile, the Weyerhaeuser-Plum Creek deal is expected to close late in the first quarter of next year or early in the second quarter.
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