Weyerhaeuser (WY) Agrees to Buy High-Quality Timberlands
Weyerhaeuser Company WY announced the acquisition of approximately 60,700 acres of high-quality timberlands in Coastal North Carolina, South Carolina and Mississippi for $163 million. It also declared the divestiture of approximately 69,600 acres of land in Upstate South Carolina for $170 million.
The two distinct deals with Forest Investment Associates are subject to customary closing conditions and expected to close in the fourth quarter of 2023.
The acquired high-quality timberlands have attractive timber attributes, including mature, highly productive acreage, which is well integrated with WY’s existing timberlands and mill operations.
The buyout deal is fee ownership, which includes 80% planted pine acreage and strong site productivity, delivering impressive long-term timber returns. Also, the timberlands are well-stocked and are expected to produce an attractive sawlog mix and an average harvest of 6.9 tons per acre (or 420,000 tons) annually in the first five years.
The company projects an average adjusted EBITDA from timber operations of approximately $130 per acre (or $7.7 million) annually for the first five years.
These agreements are tax-efficient, like-kind exchanges with minimal transaction costs. Also, the deals will provide WY with an opportunity to enhance real estate cash flows and returns on high-optional coastal assets.
The stock moved south 1.1% in the after-hours trading session on Nov 30.
A Look at the Timberlands Business
Weyerhaeuser’s business segments — Timberlands, Real Estate, Energy and Natural Resources and Wood Products — are categorized primarily on the basis of products and services.
Weyerhaeuser has significant operations and infrastructure across three states, including seven mills, two distribution centers, two tree nurseries and multiple mitigation banks and real estate development projects. Post completion of the recent deal, it will own or manage more than 870,000 acres of timberlands in North and South Carolina and approximately 1,190,000 in Mississippi.
The company expects earnings (before special items) and adjusted EBITDA to be comparable sequentially in the fourth quarter. In the western region, the company anticipates that fee harvest volumes, sales prices and forestry and road expenses will show similar performance compared with the prior year quarter. In the southern region, the company foresees that fee harvest volumes, sales prices and per-unit log and haul costs will remain consistent with those in the third quarter of 2023.
Share Price Performance
Shares of Weyerhaeuser have strongly outperformed the Zacks Building Products - Wood industry this year. Despite the rapidly changing market conditions and persistent supply-chain woes, Weyerhaeuser’s operational excellence initiatives, solid momentum in U.S. housing and solid repair and remodel demand bode well.
Zacks Rank & Key Picks
Weyerhaeuser currently has a Zacks Rank #3 (Hold).
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