FEDERAL WAY, Wash.- Weyerhaeuser Company (NYSE: WY) ("Weyerhaeuser") today announced that it has entered into a definitive agreement pursuant to which Weyerhaeuser's homebuilding subsidiary, Weyerhaeuser Real Estate Company ("WRECO"), will combine with a subsidiary of TRI Pointe Homes, Inc. (NYSE: TPH) ("TRI Pointe") in a Reverse Morris Trust transaction.
The combination will result in Weyerhaeuser shareholders receiving approximately 130 million shares, or 80.5 percent of the combined company on a fully diluted basis, with pre-transaction TRI Pointe shareholders owning the balance. The transaction, which also includes a cash payment of approximately $700 million to Weyerhaeuser, is valued at approximately $2.7 billion based on TRI Pointe's November 1, 2013 closing stock price.
The transaction is expected to be tax-free for Weyerhaeuser and its shareholders and is anticipated to close during the second quarter of 2014. This combination will create a market-leading homebuilder with considerable long-term growth potential.
"As a result of the strategic review of our homebuilding business, the Board of Directors has determined that combining Weyerhaeuser Real Estate Company with TRI Pointe creates the greatest value for our shareholders," said Doyle Simons, Weyerhaeuser president and chief executive officer. "The combined company will be a strong standalone homebuilder, and the separation of our homebuilding division allows us to focus on driving performance in our forest products businesses to deliver further value to our shareholders."
Mr. Simons added, "We have great respect for TRI Pointe's proven management team and are confident in their ability to ensure WRECO achieves its full potential. I know that our WRECO employees will play a big role in the future success of the new TRI Pointe."
Under the terms of the transaction agreement, Weyerhaeuser will distribute ownership of WRECO to Weyerhaeuser shareholders in either a spin-off or split-off transaction, which will be immediately followed by a merger of WRECO with a subsidiary of TRI Pointe, with WRECO surviving the merger and becoming a wholly owned subsidiary of TRI Pointe. If Weyerhaeuser elects a spin-off, all Weyerhaeuser shareholders will participate pro-rata. In a split-off, Weyerhaeuser will conduct an exchange offer pursuant to which its shareholders will elect whether to exchange Weyerhaeuser shares for WRECO shares. Weyerhaeuser will determine which approach it will take prior to closing the transaction and no decision has been made at this time. Regardless of the method, upon closing of the merger, Weyerhaeuser shareholders will receive approximately 80.5 percent of TRI Pointe shares, on a fully diluted basis, and pre-transaction TRI Pointe shareholders will own the balance of the combined company's shares.
The value of the transaction is $2.7 billion, comprising approximately 130 million shares of TRI Pointe common stock, valued at $2.0 billion based on the closing market price of TRI Pointe's shares on November 1, 2013, and, immediately prior to the distribution of WRECO, an approximately $700 million cash payment from WRECO to Weyerhaeuser, which will be retained by Weyerhaeuser after the closing of the transaction. The amount of the cash payment to Weyerhaeuser is subject to adjustment based on the terms set forth in the transaction agreement. Upon closing, TRI Pointe will have approximately 161 million shares outstanding. The transaction is expected to be tax-free for both companies and their shareholders.
Under the terms of the transaction agreement, certain assets of Weyerhaeuser's real estate business will be excluded from the transaction and retained by Weyerhaeuser.
The transaction is anticipated to close in the second quarter of 2014, subject to customary closing conditions, including regulatory and TRI Pointe shareholder approvals. TRI Pointe and WRECO will continue to operate separately until the transaction closes.
Governance and Management
Barry S. Sternlicht will continue as Chairman of the TRI Pointe Board of Directors, which will be expanded from seven to nine directors. Weyerhaeuser will select four directors for appointment to the Board, while TRI Pointe will select five.
Doug Bauer will continue to serve as chief executive officer of TRI Pointe. Tom Mitchell and Mike Grubbs will continue to serve as president and chief operating officer, and chief financial officer, respectively.
TRI Pointe's headquarters will remain in Irvine, California.
Citigroup and Morgan Stanley are serving as financial advisors to Weyerhaeuser, and Cravath, Swaine & Moore LLP is its legal advisor.
Weyerhaeuser Company, one of the world's largest private owners of timberlands, began operations in 1900. Weyerhaeuser owns or controls nearly 7 million acres of timberlands, primarily in the U.S., and manages another 14 million acres under long-term licenses in Canada. Weyerhaeuser manages these timberlands on a sustainable basis in compliance with internationally recognized forestry standards. Weyerhaeuser is also one of the largest manufacturers of wood and cellulose fibers products, and it develops real estate, primarily as a builder of single-family homes. The company is a real estate investment trust. In 2012, Weyerhaeuser generated $7.1 billion in sales and employed approximately 13,200 people who serve customers worldwide. Weyerhaeuser is listed on the Dow Jones World Sustainability Index, and the company's common stock trades on the New York Stock Exchange under the symbol WY.
Have something to say? Share your thoughts with us in the comments below.