Weyerhaeuser Company (WY), which had previously announced a split-off decision for its homebuilding and real estate company, WRECO, has started the exchange offer related to the transaction. WRECO will be merged with a subsidiary of TRI Pointe Homes, Inc. (TPH), becoming a wholly owned subsidiary of the latter.
As decided, Weyerhaeuser’s shareholders will have an option to convert their holdings in the company into WRECO common shares, which will ultimately give them the right to receive Tri Pointe shares. As expected, nearly $1.11 worth of Tri Pointe shares will be exchanged for every $1.00 of Weyerhaeuser’s common shares.
The company expects each of its common shares to be exchanged for a maximum of 1.7003 shares of WRECO or 2.2053 shares of Tri Pointe. Also, nearly 100 million of WRECO shares (converting into 129.7 million Tri Pointe shares) will be required for the exchange offer.
Weyerhaeuser anticipates the exchange offer to close on Jun 30, 2014, following which the merger of Tri Pointe’s subsidiary with WRECO will take place. 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.
We believe the aforementioned transaction, when fully complete, 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 $17.8 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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