Weyerhaeuser Announces Final Exchange Ratio for WRECO Split-Off


Weyerhaeuser Company (WY) took a step forward toward splitting off its homebuilding and real estate company, WRECO to TRI Pointe Homes, Inc. (TPH) by announcing the final exchange ratio related to the transaction.

As disclosed, Weyerhaeuser’s shareholders will have an option to convert each of their holdings into 1.7003 common shares of WRECO, which, in turn, can be converted into 1.297 shares of TRI Pointe Homes.

Effectively, each share of Weyerhaeuser will be exchanged for 2.2053 common shares of Tri Pointe (i.e., shareholders with $1.00 worth of Weyerhaeuser’s shares will receive $1.05 worth of Tri Pointe’s shares). Weyerhaeuser anticipates accepting nearly 58.8 million common shares for the exchange offer.

The exchange offer will presently consummate on Jul 2 as against Jun 30 aimed earlier. Upon completion of the offer, WRECO will be merged with a subsidiary of TRI Pointe Homes, becoming a wholly owned subsidiary of the latter.

Following the completion, the split-off transaction will result in lower outstanding shares for Weyerhaeuser, while 79.6% of Tri Pointe’s shares will represent those that were issued in connection with the deal.

Market sentiments were in favor of Weyerhaeuser as the company touched a new 52-week high of $33.26 during its trading session yesterday. With a trading volume of nearly 21.3 million shares, the company closed at $33.09, reflecting a year-to-date return of 6.4%.

We believe the aforementioned transaction will bode well for Weyerhaeuser’s growth prospects, as freed up resources can be utilized for its core forest products business. Also, the transaction will be tax-free for shareholders participating in the exchange offer.

Weyerhaeuser currently has a $19.4 billion market capitalization and carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the building products industry include Nortek Inc. (NTK) and United Rentals, Inc. (URI), each holding a Zacks Rank #2 (Buy).

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