Weyerhaeuser Company (WY) made a number of strategic announcements on June 16, 2013, all of which might have long-term implications on its operations once implemented.
Firstly, Weyerhaeuser’s board of directors announced the election of Doyle Simons as the company’s new president and chief executive officer. Simons will be replacing Dan Fulton and the change will be effective from Aug 1, 2013.
Secondly, Weyerhaeuser’s board authorized the search for suitable alternatives for its homebuilding and real estate company, WRECO. The company mentioned that the alternatives will include the continuation of WRECO’s operations, or merger, sale and spin-off among others. However, the board did not specify any specific time period for review.
WRECO’s financial results are recorded under the company’s Real Estate segment. WRECO develops single-family housing and residential lots, including master-planned communities and other real estate activities. In 2012, roughly 15.1% of the company’s total revenue was derived from this segment.
Thirdly, Weyerhaeuser announced the signing of an agreement to acquire Longview Timber LLC for roughly $2.65 billion from Brookfield Asset Management Inc. The transaction value will be paid through funds raised from issuances of debt and equity.
The transaction will add approximately 645,000 acres of timberlands to the company’s Washington and Oregon asset base. Post the acquisition, the company’s timberland assets in Pacific Northwest will reach 2.6 million acres, representing 33% increase, while Weyerhaeuser’s total ownership of U.S. timberlands will be roughly 6.6 million acres. The transaction is expected to be completed by Jul 2013 and is subject to closing conditions.
Weyerhaeuser expects the acquisition to enhance its funds available for distribution. Thus, the company targets to raise its quarterly dividend for the third quarter to 22 cents from 20 cents. Also, the acquisition is likely to fetch $20 million in synergies within two years of the completion of the transaction.
We believe the aforementioned announcements, when fully implemented, will bode well for the company’s growth prospects. Also, shares might benefit in the near term from these announcements. Currently, the Zacks Consensus Estimate for Weyerhaeuser is $1.19 for 2013 and $1.42 for 2014, representing year-over-year growth of 104.7% and 19.5%, respectively.
Weyerhaeuser currently carries a Zacks Rank #2 (Buy). Other stocks to watch out for in the industry are Boise Cascade Company (BCC), Potlatch Corporation (PCH) and Universal Forest Products Inc. (UFPI), each with a Zacks Rank #2 (Buy).
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