Weyerhaeuser sells home unit to Tri Pointe in $2.7 bln deal


* Weyerhaeuser to sell homebuilding business for $2.7 bln

* Weyerhaeuser shareholders to get control of Tri Pointe

* Tri Pointe to get 27,000 lots in high-growth markets

Nov 4 (Reuters) - Tri Pointe Homes Inc is buyingWeyerhaeuser Co's homebuilding division in a $2.7 billiondeal that will give it access to developed land in key marketssuch as California and Texas and make it one of the largest U.S.homebuilders.

Weyerhaeuser, whose shareholders will control Tri Pointeafter the deal, has been looking to get rid of its homebuildingunit as it focuses on its core timber business.

Tri Pointe's existing management, including Chief ExecutiveOfficer Doug Bauer, will run the combined entity. BarrySternlicht, whose Starwood Capital Group LLC owned a 38 percentstake in Tri Pointe as of March, will continue as chairman.

Weyerhaeuser said in June that the "improving fundamentals"of the U.S. housing market made it a prudent time to explorestrategic options for its housing business.

M&A activity picked up in 2013 among U.S. homebuilders,which have been struggling to meet burgeoning demand for newhomes due to a shortage of land ready to build on.

Rather than wait for developers to turn raw land into lots -a process that takes two to five years - smaller builders suchas Ryland Group Inc and Meritage Homes Corp arefinding it easier to buy companies that have access to land inkey areas.

"What we're seeing is guys that are really looking for landopportunity and that's the big deal in the housing space today -finding land that is still attractively priced," WilliamsFinancial Group analyst David Williams said.

Tri Pointe said the deal would give it control of about27,000 lots and brands such as Pardee Homes in California,Trendmaker Homes in Texas and Maracay Homes in Arizona. It willalso make Tri Pointe one of the top 10 homebuilders in theUnited States.

Irvine, California-based Tri Pointe went public in Januaryand has a market capitalization of about $500 million. It buildshouses in California and Colorado.


Weyerhaeuser and Tri Pointe are using a deal structure knownas Reverse Morris Trust - a transaction that allows a parentcompany to sell its unit in a tax-efficient manner.

In that structure, a company spins off a unit that it wantsto divest and that unit merges with a smaller company, but thesmaller company runs the combined entity.

Weyerhaeuser said its shareholders will own 80.5 percent ofthe combined company after the deal is completed. They willreceive about $2 billion in Tri Pointe's stock, based on TriPointe's Friday close of $15.38.

The Weyerhaeuser unit, Weyerhaeuser Real Estate Co (WRECO),will also pay $700 million in cash to its parent.

Weyerhaeuser said some assets of WRECO are excluded from thedeal, which is expected to close by the end of the secondquarter of 2014.

Deutsche Bank Securities is the financial adviser to TriPointe and Gibson, Dunn & Crutcher LLP is the legal adviser.

Sources close to the matter told Reuters on Sunday that TriPointe was nearing a deal to buy WRECO for about $2.7 billion.

Shares of Tri Pointe have risen 9 percent since Reutersfirst reported on Oct. 21 that it was in advanced talks to buythe Weyerhaeuser unit.

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