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Weyerhaeuser: Not The Same Company Anymore

Weyerhaeuser: Not The Same Company Anymore | Timberland Investment | Scoop.it
At one point, WY competed for investor attention with Plum Creek Timber, Rayonier (NYSE:RYN), and Potlatch Corporation (NASDAQ:PCH). All at least reasonably large U.S. Timber owners, and over time, all four wound up as real estate investment trusts, or REITs. Each company had positives and negatives, including things like the location of their timberland and business diversification.

However, WY announced that it was acquiring Plum Creek in late 2015 in a deal that was completed in February. That not only took out a competitor, but it massively increased the size of WY's portfolio. It also augmented the REIT's timberland exposure in areas where it was a relatively smaller player. Potlach and Rayonier are now very distant competitors, with just 1.4 million and 2.7 million acres of timberland, respectively, compared to WY's roughly 13 million.

Weyerhaeuser's expanded portfolio does, indeed, provide more diversification on the timber front. It can serve just about any North American market and international ones. That's a big plus from the merger. But the Plum Creek acquisition isn't the only change that's taken shape in recent years.

Getting out of pulp

The other big change is that the company is selling its pulp business to International Paper (NYSE:IP). This follows along the same path as Potlatch, which spun off its pulp business in late 2008, and Rayonier, which spun its pulp business off in mid 2014. So, in some ways, WY's move to streamline shouldn't be a surprise.

But the pulp business is an interesting one because demand tends to be fairly steady. Pulp is used in everything from diapers to cigarette filters. During the financially led 2007 to 2009 recession that devastated the U.S. housing market, fibers was a bright spot. In fact, when Rayonier spun off its fibers assets, the company's CEO chose to head up the fibers business instead of the timberland business. That's an interesting statement to say the least.

And WY isn't done yet. It's still looking at alternatives for other non-timber businesses it owns.
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Weyerhaeuser will sell five pulp mills for $2.2 billion

Weyerhaeuser will sell five pulp mills for $2.2 billion | Timberland Investment | Scoop.it

Weyerhaeuser has agreed to sell five pulp mills in the South and Canada to International Paper for $2.2 billion in cash, the Federal Way company said Monday.

 

Weyerhaeuser expects to use much of the estimated $1.6 billion after-tax proceeds to repay money it borrowed for a previously announced $2.5 billion share-repurchase program.

 

The transaction includes five pulp mills in Columbus, Miss.; Flint River, Ga.; New Bern, N.C.; Port Wentworth, Ga.; and Grande Prairie, Alberta, with a combined total capacity of nearly 1.9 million metric tons. The sale also includes two modified fiber mills in Columbus, Miss., and Gdansk, Poland.

 

The Weyerhaeuser plants have a total annual production capacity of almost 1.9 million metric tons and employ about 1,900 workers in the U.S., Canada and Poland.

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Weyerhaeuser Closes Southern U.S. Timberlands Acreage Sale

Weyerhaeuser Closes Southern U.S. Timberlands Acreage Sale | Timberland Investment | Scoop.it

On April 1, 2016, Weyerhaeuser Company closed the previously announced sale and contribution of approximately 260,000 acres of Southern U.S. timberlands formerly owned by Plum Creek Timber Company, Inc. (“Plum Creek”) to Twin Creeks Timber LLC (“Twin Creeks”), a timberlands joint venture. Weyerhaeuser received approximately $440 million in cash and retains a 21% equity interest in the joint venture. The transaction was valued at approximately $560 million, or $2,150 per acre.

Sam Radcliffe's insight:

In related news: "Silver Creek also announced that Maine Public Employees Retirement System has committed the final $150 million necessary to complete institutional funding for Twin Creeks. Other lead institutional investors in Twin Creeks include the Washington State Investment Board, the Oregon Public Employees Retirement Fund, and the Alaska Permanent Fund Corporation, which have committed $300 million, $200 million and $100 million, respectively. In addition, Weyerhaeuser has total committed capital of approximately $200 million, which includes approximately $118 million of contributed timberland, bringing the total capital commitments to Twin Creeks to approximately $950 million. After the acquisition of the initial portfolio, Twin Creeks will have approximately $400 million for future timberland acquisitions." LINK

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Plum Creek Shareholders Approve Merger with Weyerhaeuser

Plum Creek Shareholders Approve Merger with Weyerhaeuser | Timberland Investment | Scoop.it
Shareholders approved the proposed merger of Plum Creek Timber Company and Weyerhaeuser at separate meetings on Friday, moving forward a major deal between two timber giants.

At a special meeting in Seattle, 99 percent of the shares voted were in favor, representing about 70 percent of the shares outstanding, according to a company press release.

At a similar meeting in Federal Way, Washington, more than 98 percent of the shares voting at Weyerhaeuser were in favor of the proposal.

After the merger becomes effective, Plum Creek common stockholders will receive 1.60 Weyerhaeuser common shares for each share of Plum Creek common stock. The merger is expected to become effective before the end of the first quarter of 2016. The dividend will be payable on March 18.
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For now, few changes in Maine as major timberland owner Plum Creek agrees to merger

For now, few changes in Maine as major timberland owner Plum Creek agrees to merger | Timberland Investment | Scoop.it

A Plum Creek Timber Co. official said it will be “business as usual” in Maine as the company moves forward with a plan to merge with Weyerhaeuser Co., forming one of the world’s largest timberland businesses.


Weyerhaeuser plans to buy Seattle-based Plum Creek for $8.4 billion in a deal that would give Weyerhaeuser control of an estimated 13 million acres nationwide and create a company valued at $23 billion. Although Weyerhaeuser and Plum Creek currently operate in some of the same regions of the southern and western United States, Weyerhaeuser doesn’t have any major land holdings in the Northeast. Plum Creek owns roughly 861,000 acres of timberland in Maine, much of it in the Moosehead Lake region.
***
Plum Creek is perhaps best known in Maine for the years-long regulatory and legal fight it waged to win approval for up to 975 house lots and two large resorts on roughly 16,000 acres of rezoned land in the Moosehead region. The company has yet to pursue its development plans for those lots because demand for second houses collapsed during the recession. But an additional 363,000 acres of Plum Creek land in the region were permanently protected – and offer guaranteed public access for recreation – as part of the development deal approved by state regulators.
***
Lloyd Irland, a forestry and economic consultant who formerly served as the Maine state economist and director of the Maine Bureau of Public Lands, noted that Weyerhaeuser primarily operates in the western and southern U.S. So it may take some time for the company to decide on its strategy for the Plum Creek land it would now own in Maine and other Northeastern states.

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Taking Stock: What PlumHaeuser Portends for Timber Equities...

Taking Stock: What PlumHaeuser Portends for Timber Equities... | Timberland Investment | Scoop.it

Via Jack D Bridges
Sam Radcliffe's insight:

Some outside the box thinking from Jack Bridges, thanks Jack!

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Jack D Bridges's curator insight, November 20, 2015 1:24 PM

Picture this: A great big fat kid jumping into a pile of leaves. Puts a smile on your face, doesn't it?


But, smiles aside, he made a huge mess, and there is work to do. The mischievous chubby lad above is our buddy PlumHaeuser (it's a family name, leave him alone), and now timber portfolio managers have to rake all those the leaves back into neat piles. 


1. Giants Re-Balance

First, look at the largest holders of Plum Creek (PCL):


1. Vanguard                14.2M shares

2. First Eagle                12M shares

3. I'm too lazy to keep manually typing the chart, so please click on the link to it above. Thanks!


The biggest holders of PCL (index funds) will likely hold into the merger, convert the shares into WY, and then probably scale back their positions, simply due to weighting issues. 


But, what about the funds with different constraints-- say, specific mandates to invest by sector (timber ETFs like WOOD, CUT, etc.)? How does Plumhaeuser change their positioning in 2016? 


WOOD, a $230M fund, is comprised of nearly 8% WY, and 7.7% PCL. So, do you think the fund manager is going to let WY swell to 15% of the fund? No. I don't, either. Qui bono?


Rayonier will benefit in many other ways (and RYN is rising, so maybe others are anticipating this, too), but it's already 7.5% of WOOD. So, go down from the canopy and look for other, smaller beneficiaries of this fund's re-balancing act: Potlatch (PCH) would be a good guess; CatchMark Timber (CTT) as well; Deltic (DEL),  and north of the border, West Fraser (WFTBF: OTC).


The smaller, boutique saplings within the space--Pope Resources (POPE) and The Keweenaw Land Association (KEWL)--will likely not benefit from fund re-investment, simply due to institutional & structural constraints (it's too hard to build positions, and often not worth the diligence required to invest in such small companies). 


Without even looking at the more internationally focused CUT, which has $190M in assets, or other dedicated timber investors (Pictet Timber, will also probably divest some WY post-merger), this is what raking the pile of Plumhaesuer leaves looks like to PMs. Plenty of work to be done over the holidays!


2. The Esoteric & The Need For More Product!

Will Plumhaeuser tempt the bigger TIMOs to bundle some of their maturing fund assets into a creative exit for their investors, by exploring the IPO market? 


It wouldn't be easy. The scale and geographic diversification for any new entities might be tough to piece together. And, previous offerings (see CatchMark Timber, CTT, and the shards of lucite from the ill-fated Wells Timber debacle), stand as a cautionary tale of at least the timing of these deals.


Still, TIMOs like FIA (Forest Investment Associates), Campbell Global, The ForestLand Group, and others have interesting portfolios of millions of acres, and because of fund structuring / cycles, they need liquidity somehow when the time comes to return LP capital.


And, it could be argued that there has never been a better time to create & offer a new publicly traded timber company (in REIT form and otherwise), based on a host of factors (valuation, appetite among funds, baby-boomer desire for non-bond income, etc.). 


The need for more timber related equity product from Wall Street is another current to mind going into 2016.


3. Valuation, Timing, and Consolidation

If TIMOs do seek out Wall Street to find new (smaller) investors for old assets, what kind of valuations would these businesses fetch? Would they be structured as REITs? What would this new supply of equity products say about market timing, in the face of so much consolidation across industries?


Those issues all bear watching heading into 2016 and beyond. But, whatever comes to pass, Plumhaeuser shouldn't change the way Wall Street values timberland assets (I mean, it could be argued that Plum's low equity price in relation to private value helped drive the merger).


Indeed, the cash-flows from wood will still get discounted beyond reason, and will never command anywhere near the premiums of other, sexier businesses that aren't profitable...and we like it this way, of course.


The forest will remain a place to find inefficiently priced assets, and  offer patient investors a margin of safety--and usually a chance to profit at the expense of other's short-term thinking.


JDB





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Weyerhaeuser (WY) Doyle R. Simons on Q2 2015 Results

Weyerhaeuser (WY) Doyle R. Simons on Q2 2015 Results | Timberland Investment | Scoop.it

***
Anthony Pettinari - Citigroup Global Markets, Inc. (Broker)
Okay, that's very helpful detail. And then maybe just one follow-up on timberlands. During the quarter, we saw announcements from a few large timber owners that they would put large properties on the market. I wonder generally, are you seeing any change in institutional interest for timberlands? Is it becoming a little bit more of a buyer's market? Are you seeing any trends in prices changing? And is there an opportunity for Weyerhaeuser, as a buyer or a seller, especially in the South?

Doyle R. Simons - President, Chief Executive Officer & Director
And so, I would say, overall, when you step back, Anthony, the amount of activity still is generally low in the South and the West. As you mentioned, there were some facts that came on, became available in the first half of the year, I would say, most of those have some unique challenges that people will have to work through in terms of how they're going to value those. I would say, we expect more activity in the second half of the year, and I can tell you, there's still a lot of money chasing deals. So, no, I don't see any downward pressure on timberland prices at this point in time.

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Ruling Against Big Timber, Federal Court Maintains Habitat Protections for Endangered Frog in Mississippi and Louisiana

Ruling Against Big Timber, Federal Court Maintains Habitat Protections for Endangered Frog in Mississippi and Louisiana | Timberland Investment | Scoop.it

A federal district court in New Orleans today upheld protections for 6,477 acres of critical habitat in Mississippi and Louisiana for endangered dusky gopher frogs, which likely number fewer than 100 remaining in the world. The court denied three consolidated lawsuits challenging a 2012 rule that established the habitat protections, including 1,600 privately owned acres of unoccupied frog habitat in Louisiana.


Today’s ruling by U.S. District Judge Martin L.C. Feldman rejected the arguments made by private landowners and the Weyerhaeuser Company, which holds a timber lease on the frog habitat in St. Tammany Parish, La. One of the landowners is represented by the Pacific Legal Foundation, a radical private-property-rights group.


The court held that the U.S. Fish and Wildlife Service reasonably concluded that the St. Tammany Parish land is essential for recovery of the frogs, which are now confined to just three sites in southern Mississippi — with only one site regularly showing frog reproduction. Although the frogs no longer live on the St. Tammany Parish lands, the Service found that those lands are essential because they contain five ephemeral ponds, each within hopping distance of the next. Dusky gopher frogs lay their eggs only in such temporary ponds — which are free of fish that would devour their eggs — and the St. Tammany Parish land was the frogs’ last known Louisiana breeding ground.

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Moody's changes Weyerhaeuser's Baa3 rating outlook to positive

Moody's changes Weyerhaeuser's Baa3 rating outlook to positive | Timberland Investment | Scoop.it

Moody's Investors Service changed Weyerhaeuser Company's (Weyerhaeuser) rating outlook to positive from stable and affirmed the company's Baa3 senior unsecured rating.


"The change in outlook to positive reflects the company's solid earnings momentum and our view that leverage will drop below 3x and remain there as the company's financial performance strengthens with stronger demand as US housing starts continue to improve towards normalized levels and off-shore timber demand remains strong" said Ed Sustar, Moody's Vice President.

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Weyerhaeuser's CEO Hosts Investor Meeting (Transcript)

Weyerhaeuser's CEO Hosts Investor Meeting (Transcript) | Timberland Investment | Scoop.it

Some snippets:


So let me start with Timberlands. As I mentioned earlier, we have some of the finest timberlands in the country, and we consistently produce leading EBITDA per acre owned, whether you look at it on the West or in the South, while always managing this asset on a sustainable basis. Now with that said, we think we can do more. And as we look at our Timberlands operations through the lens of operational excellence, we've identified somewhere in the neighborhood of $50 million to $70 million of opportunities to drive our relative performance. This includes opportunities in trucking and hauling, this includes opportunities in harvesting, pruning and thinning and finally, merchandising our logs and make sure they're going to the right place. Some of this will be new stuff that we haven't done before, but some will be just doing what we've done better, but having the commitment and the discipline to get it to the bottom line.


Above and beyond, what we're doing in operational excellence is, of course, our Longview Timber acquisition. We are now on schedule to get $22 million of synergies from that acquisition by year-end 2014. And just to remind you, that's our -- original goal of $20 million. In addition, we believe that on an ongoing run rate by the end of 2014, we should be in on a run rate of somewhere in $175 million to $185 million of EBITDA annually out of that business on a run rate.


So what the chart is meant to do on the right-hand side is tally up. We've got a lot going on in our Timberland operation, as I just walk us through. So what the -- this won't be exactly right and different parts will move different places, but it's just to give you a sense. But starting in 2012 at the base, as Patty is going to share with you, and as we've already started to see, we anticipate that log prices are going to continue to go up. Based on that alone, we think our earnings or our EBITDA in this business will improve by 40-plus percent 2012 into the 2016 to '18 timeframe. Above and beyond that is what I just said in Longview Timber, again, by the end of this year, we think we will be at a run rate of $175 million to $185 million of EBITDA from that acquisition. And then on top of that, of course, is the operational excellence, which will take some time to ultimately get to the bottom line.
***
So now, I'd like to walk through that market outlook in more detail. So as I said, we think that we have very positive trends for our products going forward. We expect higher demand in both -- in prices and demand for U.S. timber and wood products as a result of the recovering housing market, growing offshore demand, as well as the Canadian timber supply shortage.
***
Housing has started to recover, but we are still very much in the early stages of the housing recovery. While the exact shape of the recovery is difficult to predict, there's really no disagreement that the overall direction is up.
***
Housing has started to recover, but we are still very much in the early stages of the housing recovery. While the exact shape of the recovery is difficult to predict, there's really no disagreement that the overall direction is up.
***
Now Weyerhaeuser timberlands are very well balanced between the West and the South from a geographic basis. You can see on the West that prices have already risen rapidly for our prime Douglas fir logs. This is a result of that robust export market that we just talked about on the previous slide, as well as housing starting to recover. By contrast, you can see in the South that prices have been relatively flat. That's because the South is more of a domestic housing play with very little export. But we expect that as now housing continues to recover and the supply of Canadian lumber further constricts, that we will start to see log prices move in the South as well. Also, those are very positive for Weyerhaeuser's log and lumber business.


Talking a little more about the constraints in Canada. You can see on the left-hand side of the chart that back in the last housing cycle, at the peak of the cycle, Canadian lumber accounted for just under 35% of the U.S. lumber market share. However, because of the damage that has been done by the Mountain Pine beetle in British Columbia, and British Columbia is the largest lumber producing province in Canada, so that, combined with the fact that the provinces in Eastern Canada have restricted their harvest as well, Canadian lumber has and will continue to lose share of the U.S. market as housing continues to recover. We would expect that by 2015 that, that share will drop to 25% from just under 35%, and will drop another 5% by 2020.

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Saline County Timberland Packed Into $13.5M Sale

Saline County Timberland Packed Into $13.5M Sale | Timberland Investment | Scoop.it

Almost 9,000 acres of timberland in western Saline County sold for $13.5 million.


Green Bay Packaging Inc. of Green Bay, Wis., bought the property from Weyerhaeuser Co. of Federal Way, Wash.


The 8,973 acres stretch from the Garland County line to within 4.5 miles of Paron and lie roughly 2 miles south of Lake Winona and 2 miles north of Hot Springs Village.


You might recall the two parties struck a $14.2 million deal for about 8,835 acres in Saline County back in 2011.


Both properties support Green Bay’s pulp and paperboard mill in Morrilton.

Sam Radcliffe's insight:

The arithmetic: $1,504 per acre.

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Is Weyerhaeuser Destined for Greatness?

Is Weyerhaeuser Destined for Greatness? | Timberland Investment | Scoop.it


Weyerhaeuser put together a strong performance with seven out of nine passing grades, but it was tripped on free cash flow, which has grown more modestly (albeit from a much higher starting point) than net income, and which may not be sufficient to support the company's current dividend payments. A surge in free cash flow could bring Weyerhaeuser to perfection, but that may be far easier said than done.

***

Weyerhaeuser is poised to profit from the growing demand of construction materials in the U.S. homebuilding markets, particularly as lumber costs continue to rise. Fool contributor Bob Ciura notes that home affordability in the U.S. remains near historically high levels, and home prices rose in 87% of U.S. cities in the second quarter, signaling either a robust recovery, or the possible start of a new bubble, depending on how you want to look at it.

***

Weyerhaeuser recently acquired Longview Timber from Brookfield Asset Management and its Brookfield Infrastructure Partners affiliate in a deal worth $2.65 billion. Fool contributor Anjum Khan points out that the deal provides access to roughly 645,000 acres of timberland, which will increase its timber assets in the Pacific Northwest by a third, to about 2.6 million acres. In addition, the region provides easy access to export markets across the Pacific Ocean in Asia, as well as good soil and climatic conditions for the Douglas fir. Weyerhaeuser would also be able to take advantage of tight supply conditions in the north of British Columbia caused by the pine beetle through this new acreage.

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Weyerhaeuser adds some color on Longview acquisition

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Jack D Bridges's curator insight, June 22, 2013 10:28 AM

To an outside observer, $4k/acre seems like a heavy price to pay--no matter how great the age-class, stocking, or "front-loaded" Douglas-Fir export harvest. That said, much of the 645K acres fits well with WY's current holdings (creating efficiencies), not to mention the array of HBU options (I'm guessing zero acres are constrained by conservation easements, but I have no clue). Weyerhaeuser also neglected to talk about other revenue streams for the Longivew acreage, such as easement sales, and potential for carbon credits.

 

On its face, buying such a massive concern at a time when most asset prices aren't cheap AND global growth waning, has risks. From a broad timing perspective, I'm skeptical. However, since WY is likely divesting WRECO--or selling its home building division at a favorable time, and  issuing equity/debt to fund the purchase--the structure of the transaction looks smart. The fact that WY is raising its dividend speaks to management's confidence (or, what REIT investors demand...but that's a topic for another post).

 

I'll leave a deeper analysis of the deal to folks with more knowledge of the former Longview assets. For equity investors, the deal will take some time to assess. I have no position in WY anymore--I was fortunate to purchase shares for people between $17-18, and thought WY equity was expensive over $30 (where I sold). 

 

Many thanks to Sam Radcliffe of the formidable P&C (http://www.prentissandcarlisle.com/) for scooping the WY investor presentation!

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Weyerhaeuser (WY) Doyle R. Simons on Q1 2016 Results - Earnings Call Transcript

Weyerhaeuser (WY) Doyle R. Simons on Q1 2016 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Collin P. Mings - Raymond James & Associates, Inc.

First question for me. Just as far as acquisition opportunities from here, Doyle, can you maybe just touch on the final terms with the Twin Creeks JV? And, obviously, we've seen a few larger Timberland deals here announced in the last few weeks. Maybe just your take on the current acquisition environment.

Doyle R. Simons - President, Chief Executive Officer & Director

Yeah. So, let me comment on the current acquisition environment and then I'll ask Russell to comment on Twin Creeks. So, in terms of the current acquisition environment, there continues to be a lot of interest in this asset class and, frankly, a lot of money chasing deals. As we've seen announced recently, there have been some deals that are happening. I would highlight on the West some transaction announced at $4,300 an acre and then in the South, of course, our Twin Creeks transaction at $2,150 an acre, and then I think I saw just last night CatchMark announced something at $2,000 an acre. So, I would tell you, as I've said, a lot of increased activity, a lot of interest in the asset class. And I would say, good values being paid for high-quality property. And, now, let me turn it over to Russell to comment on Twin Creeks.

Russell S. Hagen - Chief Financial Officer & Senior Vice President

So, Collin, as we announced, we closed the Twin Creeks transaction on April 1. And that was a deal that was put together prior to the merger, obviously. And we delayed the close so that we could sit down with the investors and make sure that we'd structured it appropriately, given Weyerhaeuser's differences to Plum Creek. So, the real key items are, the property management agreement under the Plum Creek structure was 15 years. We've shortened that to three years under the Weyerhaeuser, as amended. And then the equity ownership dropped from 25% to 21%. Those are probably the two biggest items that changed in the transaction.
***
Collin P. Mings - Raymond James & Associates, Inc.

Okay. And then just one other follow-up on Anthony's question, just as it relates to the Real Estate business. I think, Doyle, you've suggested in the past may be 15% to 20% of the combined companies could potentially be Real Estate. Is that still how you're thinking about, again recognizing you're still relatively early in that review process? But would that be fair as we start thinking about 2017 to the comment that it's going to step-up materially?

Doyle R. Simons - President, Chief Executive Officer & Director

That's exactly right, Collin. We are still comfortable with that guidance of 15% to 20%. And as I mentioned, we anticipate real estate activity will ramp-up second half of 2016 and into 2017 to get us to that range.
***
Mark William Wilde - BMO Capital Markets (United States)

Yeah. Doyle, I have a couple of portfolio questions. I think one of them you've answered already, and that is just, any potential portfolio repositioning within the Timberlands, maybe concentrating more going forward on plantations in the South and in the Northwest?

Doyle R. Simons - President, Chief Executive Officer & Director

Yes. As I mentioned, Mark, as part of the integration process we're going to – it's going to involve a review of the overall Timberlands portfolio. And again, as I mentioned with 13-plus million acres and no built-in gains tax we've got lots of flexibility as to how we create the most value for our shareholders going forward. So, that work is ongoing.

Mark William Wilde - BMO Capital Markets (United States)

Okay, and is it fair to say that the focus is going to be kind of plantation forestry, Doyle?

Doyle R. Simons - President, Chief Executive Officer & Director

I don't want to exclude anything at this point, Mark. Let us do the work and figure out exactly what we want the portfolio to look like as we move forward.

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Weyerhaeuser commits three million acres in WA and OR to support the reintroduction of the North American Fisher

Weyerhaeuser commits three million acres in WA and OR to support the reintroduction of the North American Fisher | Timberland Investment | Scoop.it

Weyerhaeuser Company plans to commit up to 3 million acres of private timberland in Washington and Oregon to support a variety of conservation efforts focused on reintroducing the North American Fisher (Fisher) throughout the West. The Fisher reintroduction and conservation effort is being led by a variety of partners including: U.S. Fish & Wildlife Service (USFWS), state wildlife agencies, conservation organizations and private forestland owners, like Weyerhaeuser.


Today, the USFWS took a constructive step by recognizing the positive benefits of working forests when it determined the Fisher is not warranted for listing as a threatened or endangered species in the Northwest. Instead, it will cooperatively work with private landowners to encourage Fisher conservation. The USFWS has structured conservation agreements with private forestland owners like Weyerhaeuser, which are called Candidate Conservation Agreements with Assurances (CCAAs). The agreements last for 20 years

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Weyerhaeuser (WY) Announced Completion of Merger with Plum Creek (PCL)

Weyerhaeuser (WY) Announced Completion of Merger with Plum Creek (PCL) | Timberland Investment | Scoop.it
Weyerhaeuser Company (NYSE: WY) today announced the completion of the merger with Plum Creek Timber Company, Inc. Shareholders of both companies approved the transaction at separate special meetings of shareholders held on Feb. 12, 2016. The combined company retains the Weyerhaeuser name and continues to be traded under the WY ticker symbol on the New York Stock Exchange.

The combined company owns more than 13 million acres of diverse and productive timberlands and operates 38 wood products manufacturing facilities across the country.
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Weyerhaeuser (WY) Doyle R. Simons on Q4 2015 Results - Earnings Call Transcript

Weyerhaeuser (WY) Doyle R. Simons on Q4 2015 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Collin P. Mings - Raymond James & Associates, Inc.

Okay. Then, moving to Timberlands, just maybe as we enter the year here, just update us on your latest thinking as it relates to the potential improvement in sawlog prices in the U.S. South this year? What are you thinking about for 2016 and then, just more broadly continue to extend, just how you're thinking about the price recovery in the South?

Doyle R. Simons - President, Chief Executive Officer & Director

Yes. So, if you think about Southern log prices, Collin, our prices were up a couple of percent in 2015 versus 2014, and we would anticipate a similar increase in 2016 versus 2015.

From a broader picture, if U.S. housing starts continue to improve, demand for lumber will rise. And we expect the tension and rising prices across the Southern log markets, we are confident that's going to continue to pay out.


And frankly, the additional mills, whether it be the Canadians coming down and investing in mills and increasing the productivity of those mills or Klausner adding the three mills that they're adding, that's all positive from a demand standpoint for Southern sawlogs as well.


So we are – we remain confident that we're going to reach that inflection point and see Southern sawlog prices begin to rise on a more aggressive basis than the 2% that we've seen over the last couple of years.
***
Mark William Wilde - BMO Capital Markets (United States)

And, Doyle, just to follow on this, we all, I think, buy into supply and demand. But on the supply side, it seems like for many years here because of the weakness in housing, we've really been under-harvesting the growth rates down in the South. So we've got some accumulated inventory, and I just wonder how that accumulated inventory affects the rebound in pricing.

Doyle R. Simons - President, Chief Executive Officer & Director

Yeah, Mark, that's a really good point and there's no doubt that there is some accumulated inventory as housing has improved over the last couple of years, we have started to work through some of that accumulated inventory, but there's still some out there. So that's why I'll say there's still a little bit of time, if housing continues, to improve to work through accumulated inventory. But once we do that, you can hit that inflection point of supply and demand, and that's where you start to see the significant increase in pricing.
***
Mark A. Weintraub - The Buckingham Research Group, Inc.

Okay. And then, maybe lastly, kind of following on Mark Wilde's question a little bit. One of the components of the bullish lumber, as well as log story has been the expected reduction in supply coming from British Columbia related to the beetle, et cetera. It doesn't seem to have happened yet and lots of reasons maybe that (51:48). Are you still of that view that we will see a reduction and any color you can provide on how that might play into the market?

Doyle R. Simons - President, Chief Executive Officer & Director

Yes, Mark. We are absolutely confident that that's going to happen and all you have to do is spend some time in that area and see the devastation that the pine beetle has, in fact, caused. You're starting to see some announcement as you know of some lumber mill closures because of that. I think what's happened is, part of that has just been distorted by the fact that there's been less demand from China. So, some of the impact from lumber that would normally would get on to China has come to the U.S. and that has temporarily offset the pine beetle situation. But if you just look at what the allowable cuts are, if you look at just the overall fiber situation in Canada, we are confident that the pine beetle scenario is going to play out.

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What Does The Weyerhaeuser-Plum Creek Merger Mean For Timber Investors?

What Does The Weyerhaeuser-Plum Creek Merger Mean For Timber Investors? | Timberland Investment | Scoop.it

SUMMARY


  • The proposed WY/PCL merger will result in it representing about 83% of the public U.S. timber REIT market.
  • PCL shareholders should benefit from the transaction via the price premium, the reported synergies, the increased dividend, and the net timber portfolio diversification benefit.
  • For WY investors, a lot of their benefit relies on the reported synergies. Furthermore, the transaction represents a doubling of a bet on the performance of Southeast U.S. timberland, with less net diversification benefit (as compared to PCL's diversification benefit). WY shareholders could have taken this Southeast timberland bet themselves without WY taking it for them. However, if WY wants to increase its timberland holdings, buying timberland in the public markets is likely a better method than purchasing assets in the private market.
  • For other investors, they will have the ability to invest in a merged timber behemoth (WY/PCL) that represents a virtual timber REIT "index." This merged entity should be more efficient than the two pre-merged entities. However, investors will have less ability to create their own customized portfolios as the two largest public timber REITS will now become one.
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Weyerhaeuser, Plum Creek to combine into one timber giant

Weyerhaeuser, Plum Creek to combine into one timber giant | Timberland Investment | Scoop.it

Weyerhaeuser is buying Plum Creek for $8.4 billion to form the nation’s largest private owner of timberland, the Seattle-area firms announced Sunday. The combined company will own more than 13 million acres of U.S. timberland and have a market capitalization of $23 billion based on current prices, ranking it sixth among publicly traded companies based in Washington state. “We saw a unique opportunity to combine the two industry leaders in a way that will generate substantial value for shareholders by creating the world’s premiere timberland and forest-products company,” Weyerhaeuser CEO Doyle Simons said in an interview Sunday.
***
Analysts said it’s an epic consolidation move in an otherwise fragmented industry. “In the private timberland industry, they become a Goliath,” said Steven Chercover, a senior research analyst at brokerage D.A. Davidson & Co. “This couldn’t get any bigger.” Chercover said he’d expect the companies to cut a big chunk of duplicated overhead costs. The firms said they anticipate annual “cost synergies” of $100 million from the merger.

Plum Creek, which is based at Two Union Square in downtown Seattle, is the smaller of the two companies, with 1,200 employees. Weyerhaeuser, which has 12,800 employees worldwide and is based in Federal Way, plans to move its headquarters next fall into a new 150,000-square-foot building going up at 200 Occidental Ave. S. in Pioneer Square.

***
Analysts have been waiting for consolidation to sweep the timber industry, which saw demand crater after the last housing bust. Many homebuilders went bankrupt. Loggers and haulers left the business, too. And lumber imports from Canada didn’t help. In the long run, Plum Creek and Weyerhaeuser officials said, they expect housing starts will return to normal levels, though it’s unclear how long that will take. Simons said the combined company will focus on the domestic market, though it also has “very important” customers for exported logs in Japan and China.

***

For each Plum Creek share, stockholders will receive 1.6 shares of Weyerhaeuser. That will give those shareholders about 35 percent ownership in the combined operation, the companies said. Plum Creek shareholders should see a 13 percent dividend increase from what they currently receive, based on Weyerhaeuser’s current annual dividend of $1.24 a share, officials said. Following shareholder approval, the merger is expected to close by March or April, with the new company bearing the Weyerhaeuser name. Company officials said they don’t expect antitrust regulators will challenge the merger because the new company’s market share is a fraction of the 500 million acres of privately owned U.S. timberland.

Sam Radcliffe's insight:

No surprise here. All of the timber REIT's have been trading at less than the private market value of their timberlands, some quite a bit less. We had expected a private equity firm to see this opportunity, but this is the least expensive way for Weyerhaeuser to expand its holdings, and it knows a lot more about the business than a PE firm.

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Weyerhaeuser's (WY) CEO Doyle Simons on Q3 2014 Results - Earnings Call Transcript

Weyerhaeuser's (WY) CEO Doyle Simons on Q3 2014 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

***

Chip A. Dillon - Vertical Research Partners, LLC
Doyle and Patty, first question is, we've seen a pretty interesting divergence of opinion in the last few weeks. And one way you guys can, of course, buy timber is just by buying your own stock, and it looks like we've seen 2 of your competitors, one step up and pay pretty close to peak prices, I guess, for southern lands, and another of your competitors decided to focus more on, not only maybe being buying back stock, but actually selling land into The Street to buy back stock. And I didn't know if you had an opinion on what you thought of land values. And I'm really thinking of the South at this point, where there seems to be a divergence of opinion, and whether we would see you step up now or hang back?

Doyle R. Simons - Chief Executive Officer, President, Director, Member of Compensation Committee and Member of Finance Committee
So Chip, I think you can look at our actions in terms of the way we think about things. Clearly, as we've already highlighted, we are in the market actively repurchasing our shares. So we are convinced that we are creating value for our shareholders for doing that. In terms of actively buying timberland, there's no doubt that there are lots of opportunities out there to do that in today's market. There's also lots of money chasing those deals. We look at those deals, each and every one of them that comes along. And as we've said before, we're going to be very disciplined in what we actually acquire. And to date, we have not made any acquisitions in the South. The type of transactions we're looking for, again, actions, are the ones that are along the lines of what we did in the Longview acquisition. And you can look at the type of returns that we are generating from that acquisition that we made last year. That's not a South-versus-West statement, Chip. We'd look for -- if the right opportunities are there, that where we think we can grow value for shareholders, we would look at making acquisitions, both in the West and in the South. But we're just going to continue to be very disciplined in the way we look at those potential acquisition opportunities going forward.

***

Paul C. Quinn - RBC Capital Markets, LLC, Research Division
Yes, just following up on, I think, Chip's question on Timberland transactions and trying to get your viewpoint about your actions. If you could give us a little bit more color on your nonstrategic Timberland sales, where are those happening? Is it more West-based than South? And in terms of transaction values, are you seeing a steady increase over the last year?


Doyle R. Simons - Chief Executive Officer, President, Director, Member of Compensation Committee and Member of Finance Committee
Yes, so we have those in both the West and the South. I'll give you an example of one that was in the third quarter. It happened to be in Oklahoma. It was a tract that was roughly 760 acres, and it sold for $14,000-plus per acre. So that's an example of what we see occurring out in the marketplace right now. So some of it's truly nonstrategic, some of it's more HBU-type land, and that's what we've seen going on, and we think will continue to be opportunities for us going forward.

***

Collin Mings - Raymond James & Associates, Inc., Research Division
Okay, Patty. And then just one last big-picture question, Doyle, and kind of a follow-up to both Chip's and Paul's questions. Just given the strong bid for timberland right now, have you thought about just becoming more aggressive as far as capital recycling within the Timberland business? More specifically, are there certain wood baskets in the U.S. South that you want to try and get more aggressive in and have a bigger presence in, and maybe exit some of the regions you are in now? Because just looking at your footprint in the region, there are some areas in states where you have a pretty large concentration, and then some other areas where we're seeing arguably a little bit better signs of a price recovery in sawlogs that you're not in. So are you looking at kind of shifting some capital around within Timberland from that perspective?


Doyle R. Simons - Chief Executive Officer, President, Director, Member of Compensation Committee and Member of Finance Committee
Yes, that's a good question. And as you, I think, know, and as we've talked about before, we're always looking to improve through trading and buying and selling the overall quality of our timberlands. And some of that may include, as you alluded to, potentially getting in markets maybe that we're not in, although we're in most of the markets currently. So those are things that we are [Audio Gap] to consider going forward. With that said, we have, as you know, a pretty good footprint in terms of -- both in the South and in the West in terms of where our strategic timberland is located. And we're convinced that through growing and harvesting trees on that strategic timberland, we're going to be able to drive value for our shareholders going forward. But we're always looking to improve the overall quality of our timberland base, and I think we've had some success in doing that historically, and we'll continue to look at opportunities to do that going forward.

Sam Radcliffe's insight:

Weyerhaeuser's take on an issue we've been spotlighting recently.

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Weyerhaeuser and DuPont Pioneer Enter Technology License Agreement

Weyerhaeuser and DuPont Pioneer Enter Technology License Agreement | Timberland Investment | Scoop.it

Weyerhaeuser Company  today announced a technology license agreement with DuPont Pioneer that will advance seed technologies to help meet growing global demands for food, feed and fiber.


The agreement brings together agricultural and forestry know-how to sustainably improve crop productivity for corn growers around the world. Based on scientific research behind years of Weyerhaeuser NR sustainable forestry, the manufactured seed technology allows for the storage, nourishment, planting and germination of cells capable of growing into a plant. This technology provides a means to cost-effectively regenerate valuable, limited or fragile plant material.

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Weyerhaeuser Co. expanding forest fee access program

Weyerhaeuser Co. expanding forest fee access program | Timberland Investment | Scoop.it

Starting this summer, hunters will have to pay to get onto much of Weyerhaeuser Co.’s St. Helens Tree Farm and the company’s land near the coast.


Weyerhaeuser is expanding a fee system it started in Lewis County last year to its 420,000 acres in the Longview area and its holdings east of Aberdeen.


An advantage for hunters is that they’ll be able to get onto Weyerhaeuser land every day the permit is valid. In the past, much of the land was open for motorized access only on weekends during major deer and elk seasons. But the cost of such access will range from $150 per family and up.


The fee access program is the latest development in gradual restrictions on public access to private timberlands in the region.
***
“This is new to the Northwest,” [Weyerhaeuser spokesman Anthony] Chavez said. “We’ve been doing this in the Southeast for years.”
***
The company will continue its policy of allowing the public to drive without a permit over Weyerhaeuser roads that provide the only access to public lands.

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Timberland's Towering Potential

Timberland's Towering Potential | Timberland Investment | Scoop.it

According to data from the Campbell Group, a timberland investment management company with assets under management up and down the West Coast and in the southern US, timberland is probably the best long-term real estate inflation hedge. Their data shows that between 1987 and 2012, timberland showed a correlation to inflation of about 0.45. From a broader perspective, that lagged only US Treasury Bills and the S&P Goldman Sachs Commodity Index, which both had correlations of about 0.65.

According to other data, historically timber prices have increased much faster that overall prices for more than a century and, during America’s last great inflationary run between 1973 and 1981, timberland values gained an average 22 percent annually.

And demand isn’t expected to slow any time soon. In 2011, the Food and Agriculture Organization of the United Nations forecasted wood demand will double by 2040.

***

[Weyerhaeuser] controls about 6 million acres of timber forest, with about a third of its holdings located in the extremely productive Pacific Northwest region of the US, which primarily produces Douglas fir. The remaining two-thirds mostly consist of pine producing forests in the Southern US, with about 300,000 acres of pine and eucalyptus property in Uruguay.

The Pacific Northwest is the most productive timberland in the US, thanks to its cool, damp climate and typically abundant rainfall. The Douglas fir that dominates the region is also a much higher value wood than the pine typically harvested in other parts of the country.

The fact that it’s the largest timber producer in the Pacific Northwest makes Weyerhaeuser extremely attractive, because the company’s location gives it easy export access to China. This location also leaves it well placed to pick up the supply slack created by lower production caps in Canada, which is typically a key Chinese supplier.

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Weyerhaeuser Joins International Voices in Support of Forest Certification

Weyerhaeuser Joins International Voices in Support of Forest Certification | Timberland Investment | Scoop.it

Weyerhaeuser Company this week joined 25 of the world's leading forest products companies in announcing the need to significantly scale up sustainable forest management.


Weyerhaeuser and the 25 other members of the World Business Council for Sustainable Development (WBCSD) Forest Solutions Group are responsible for nearly 40 percent of annual global forest product, paper and packaging sales. 

***

The companies endorsed the announcement following an international discussion including three forest certification systems -- the Forest Stewardship Council, the Sustainable Forest Initiative(R) and Programme for the Endorsement of Forest Certification -- at WBCSD's Council Meeting in Istanbul, Nov. 4. The Leadership Statement on the Value and Future of Forest Certification recognizes that reducing forest loss is a global societal priority requiring immediate and concerted action.


Earlier this year, Weyerhaeuser attained international stakeholder membership in the Programme for the Endorsement of Forest Certification, the world's largest forest certification system and the certification system of choice for small, non-industrial private forests. PEFC, which is made up of large forest owners and hundreds of thousands of family forest owners around the world, has endorsed two North American certifications standards, including the Sustainable Forestry Initiative. In the United States, PEFC also endorses the American Tree Farm System, which means landowners certified to SFI and Tree Farm also comply with the PEFC's internationally-recognized sustainability benchmark.

***

Weyerhaeuser owns, leases or licenses 20.5 million acres of forests in North America certified to SFI, and more than 300,000 acres in Uruguay certified to FSC and PEFC.


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WeyCo looking to boost harvests of former Longview Timberlands

WeyCo looking to boost harvests of former Longview Timberlands | Timberland Investment | Scoop.it

Weyerhaeuser Co. is planning to increase the timber harvested in its former Longview Timberlands property to meet rising export and domestic demand, company officials said Friday.


In their quarterly earnings call with investors, company officials said the 645,000 acres of the former Longview Fibre Co. timberlands in Washington and Oregon are in a prime location to supply its West Coast properties, including the lumber mill and log dock in Longview.


Officials added that they believe they can increase log and lumber output on the lands by taking immediate advantage of timber that is mature enough to harvest.


“We’ll be accelerating that harvest because of the maturity of that forest,” Patty Bedient, Weyerhaeuser’s chief financial officer, told analysts.


Federal Way-based Weyerhaeuser announced its $2.15 billion purchase of Longview Timberlands LLC June 16 from Toronto-based Brookfield Asset Management. The sale was finalized earlier this week. With the purchase, Weyerhaeuser increased its timber holdings in the West by 33 percent, to 2.6 million acres.


Company officials say they don’t expect income from the additional timberlands to offset a seasonal dip in log export sales expected in the current quarter. Log export prices are expected to fall because of seasonal construction slowdowns in China and Japan, Bedient said.


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