Weyerhaeuser and Plum Creek will merge, creating a $23 billion timber, land and forest products company structured as a real estate investment trust (REIT), in an all-stock transaction.

Holding more than 13 million acres of timberland in the U.S., the new business expects to shave $100 million in costs. The deal will be followed by a $2.5 billion share repurchase. Plum Creek holds 6 million acres in 19 states, and operates wood products mills in the Northwest.
 
Rick R. Holley will be non-executive chairman; Doyle R. Simons will be president and CEO.

Separately Weyerhaeuser is looking at divesting its cellulose fiber business, which serves the food container market. Here is the official release announcing the merger:

Weyerhaeuser Company (NYSE:  WY) and Plum Creek (NYSE: PCL) today announced they have entered into a definitive agreement to create the world's premier timber, land and forest products company with more than 13 million acres of the most productive and diverse timberland in the U.S. At closing, the combined company is expected to have an equity value of $23 billion based on current share prices. The combined EBITDA for both companies in 2014 was $2.2 billion.

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Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Plum Creek shareholders will receive 1.60 shares of Weyerhaeuser for each share of Plum Creek held. This fixed exchange ratio represents an implied premium of 13.8% to the 30-trading-day Volume Weighted Average Price ratio of Plum Creek shares to Weyerhaeuser shares.

Following closing, Weyerhaeuser and Plum Creek shareholders will own approximately 65% and 35%, respectively, of the combined company's common stock. Weyerhaeuser intends to execute a $2.5 billion share repurchase shortly after closing. The repurchase will result in a net financial impact on the company that is as if the deal were structured with approximately 70% stock and 30% cash. The combined company expects to maintain Weyerhaeuser's current annual dividend of $1.24 per common share, representing a 13% dividend increase to the dividend currently received by Plum Creek shareholders.

 "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 R. Holley, chief executive officer for Plum Creek. "These two companies are already best-in-class timberland managers with a relentless focus on sustainable resource management. The breadth and diversity of our combined land and timber assets uniquely position the new company to capitalize fully on the improving housing market, continue to capture Higher and Better Use land values across the combined portfolio, and create additional opportunities to build lasting value. Doyle Simons and I share a commitment to disciplined capital allocation and sustained value creation, and I look forward to working together as we build a great new company."
 

"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 R. 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. I have the utmost respect for Rick Holley and the Plum Creek team and look forward to working together to successfully integrate these two outstanding companies."  

• The merger of Weyerhaeuser and Plum Creek creates a winning combination with:
• The largest private ownership of timberland in the U.S.
• More than 13 million acres of diverse, productive forests
• The ability to drive performance through shared best practices and economies of scale
• A unique ability to capitalize on the housing recovery
• Significant Higher and Better Use potential across the combined portfolio
• A best-in-class management team
• A recognized commitment to sustainable resource management
• Low-cost manufacturing assets
• A strong balance sheet and a commitment to an investment grade credit rating
• Anticipated annual cost synergies of $100 million
• Accretion to per-share Funds Available for Distribution in the first full year following closing
• An attractive dividend
• A disciplined approach to capital allocation
• Rick Holley will serve as non-executive chairman of Weyerhaeuser's board, which will be expanded to 13 directors. Eight directors will be from Weyerhaeuser (including Simons) and five directors will be from Plum Creek (including Holley).
• Doyle Simons will serve as president and CEO of the combined company. Upon closing, the executive team will include:
• Rhonda Hunter, Senior Vice President, Timberlands
• Tom Lindquist, Executive Vice President, Real Estate, Energy & Natural Resources
• Adrian Blocker, Senior Vice President, Wood Products
• Russell Hagen, Senior Vice President, Chief Financial Officer
• Devin Stockfish, Senior Vice President, General Counsel & Corporate Secretary
• Denise Merle, Senior Vice President, Human Resources
• Tim Punke, Senior Vice President, Corporate Affairs

"We've drawn from the best talent in each company to select a leadership team with unmatched expertise in the industry," said Simons. "I'm confident these are the right leaders to take best practices from both companies to achieve our targets, serve our customers, and drive shareholder value over the long term."

The transaction requires the approval of shareholders of both Weyerhaeuser and Plum Creek and is subject to customary closing conditions. The transaction is expected to close in late first quarter or early second quarter of 2016. The combined company will retain the Weyerhaeuser name and continue to be traded under the WY ticker symbol on the New York Stock Exchange. As previously announced, Weyerhaeuser intends to move its headquarters to Seattle in mid-2016.

In a separate news release, Weyerhaeuser announced that its board of directors has authorized the exploration of strategic alternatives for its Cellulose Fibers business. Cathy Slater will continue to lead this business as senior vice president of Cellulose Fibers throughout the review process.

For Weyerhaeuser, Morgan Stanley & Co. LLC is serving as financial advisor and Cravath, Swaine & Moore LLP is serving as legal counsel.
Goldman Sachs is serving as lead financial advisor to Plum Creek. BofA Merrill Lynch is also serving as a financial advisor to the company. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel.

Weyerhaeuser Company began operations in 1900 and is one of the world's largest private owners of timberlands. It owns or controls nearly 7 million acres of timberlands, primarily in the U.S., and manages additional timberlands under long-term licenses in Canada. The company 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. The company is a real estate investment trust. In 2014, its continuing operations generated $7.4 billion in sales and employed approximately 12,800 people who serve customers worldwide. Weyerhaeuser is listed on the Dow Jones World Sustainability Index and its common stock trades on the New York Stock Exchange under the symbol WY. 
 
Plum Creek is among the largest and most geographically diverse private landowners in the nation with more than 6 million acres of timberlands in 19 states. The company also operates wood products mills in the Northwest. Plum Creek manages its working forests using sustainable practices to benefit its many stakeholders. Plum Creek employees work together to create shareholder value, serve as stewards of the environment, make wood products for everyday use, and build strong communities. The company is a real estate investment trust.