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.
|Scooped by Sam Radcliffe|