Weyerhaeuser merges with Plum Creek

The merger leaves the REIT as the largest timber owner in the US, with an equity value of $23bn.

Weyerhaeuser will pay timber giant Plum Creek $8.4 billion to merge the companies as one real estate investment trust (REIT) and become the largest timberland owner in the United States. The merged company’s equity value is expected to reach $23 billion, while its land-holdings will exceed 13 million acres. The deal is expected to close in the first or second quarter of next year.

Doyle Simons will continue his role as chief executive and president at Weyerhaeuser at the top of the merged REIT while Plum Creek’s chief executive, Rick Holley, will become non-executive chairman. Weyerhaeuser’s board will grow to a team of thirteen.

Plum Creek reported a diminished operating profit of $6 million from its Northern Resources segment in this year’s third quarter, compared to $13 million for the third quarter of 2014. The segment is responsible for timberlands in Maine, Michigan, Montana, New Hampshire, Oregon, Vermont, Washington, West Virginia and Wisconsin.  Southern Resources reported an operating income of $33 million compared to $31 million in 2014.

Its taxable Real Estate segment generated a lot more revenue: $129 million this year compared to $60 million in the third quarter of 2014. The company said in a press statement that a $3 million decline in profits in its Manufacturing segment was because of weaker results from the lumber product line.

But Plum Creek has also been exploring new ways to invest in timberlands. Earlier this year, Plum Creek entered into a joint venture with Silver Creek Capital Management called Twin Creeks Timber, with the aim of growing a $1 billion portfolio by selectively acquiring timberlands from third parties.

Principal and chief executive of Equilibrium Capital Dave Chen told Agri Investor: “I’m convinced the Plum Creek and Silver Creek fund is even more credible now that the Plum Creek and Weyerhaeuser merger has been announced.”