Timberland Investment
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Timber companies Potlatch and Deltic complete merger

Timber companies Potlatch and Deltic complete merger | Timberland Investment | Scoop.it
Potlatch Corp. has completed its merger with a smaller rival, Deltic Timber Corp., in an all-stock deal that creates a company with 2 million acres of private timber holdings.

Spokane-based Potlatch and Arkansas-based Deltic announced the finalization of the deal Tuesday afternoon. The new company is called PotlatchDeltic Corp. Its shares will trade on the Nasdaq Stock Market under the symbol “PCH.”

Mike Covey, formerly Potlatch’s chairman and CEO, will remain in that role for PotlatchDeltic, which will keep its Spokane headquarters. Covey said in a news release the entities are working to integrate business operations and capture benefits from the merger.

PotlatchDeltic will be able to produce about 1.2 billion board feet of lumber annually, which ranks it among the leading U.S. lumber manufacturers, Covey said.

PotlatchDeltic has about 1,500 employees and a market capitalization of more than $3 billion, with $700 million in debt. About half of the company’s timberland is in the South, mostly in Arkansas and northern Louisiana. The company also has large timber holdings in Idaho and Minnesota.

The manufacturing operations include six lumber mills, a plywood plant and a fiberboard plant.

Deltic shareholders will receive 1.8 shares of PotlatchDeltic stock for each outstanding share of Deltic stock. About 22 million common shares of PotlatchDeltic will be issued to Deltic shareholders, representing about 35 percent of the company’s outstanding shares.
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Deltic Timber In The Crosshairs?

Deltic Timber In The Crosshairs? | Timberland Investment | Scoop.it
On February 22, 2017, Southeastern Asset Management, which owns a 15% stake in Deltic Timber Corporation (NYSE:DEL), filed a 13D with the Securities and Exchange Commission. In it, Southeastern stated that it, and Deltic, had been approached by multiple parties interested in merging or acquiring Deltic. It also stated that Deltic had hired a financial adviser but refuses to enter into substantive negotiations with these parties. They go on to state that the interested parties are willing to pay a price for the company in excess of current trading levels.

On February 22, DEL closed at $77.68, and the very next day, it went to $82.28. It has recently fallen back to $75.29. The stock's 52-week high and low are $85.42 and $53.21, respectively. Deltic pays a dividend of $.40, about 0.53%, well below what other timber RIETs and MLPs pay.

Deltic Timber Corporation is a C corporation based in El Dorado, Arkansas. It owns 530,000 acres of timberland in Arkansas and Louisiana. It also owns two sawmills and an MDF mill. Last year, Deltic produced 274 MMBF of lumber and 104 MMSF of MDF. Total sales for the company in 2016 were $219.4 million. About 16% of sales came from Woodlands, 74% from Manufacturing, and about 10% from Real Estate. Operating income for the three segments in 2016 was $44.6 million: 40% from Woodlands, 43% from Manufacturing, and 17% from Real Estate. G&A is a whopping $22.9 million. Net Income, a meaningless figure for a timber company, was $9,245 million. Cash from operations, a much better number, was $43,593 million.

Who could be interested in acquiring Deltic? My best guess is Weyerhaeuser (NYSE:WY) and/or Potlatch Corp. (NASDAQ:PCH). Both REITs have operations intermingled with Deltic's, and they also own large manufacturing operations. It could also be one of the many TIMOs; however, because of Deltic's manufacturing assets, my bet is one of the REITs.

Lets take a quick and dirty look at a valuation of Deltic's assets:

503,500 acres of Timberland at $2,000/acre - $1,007,000,000

26,500 acres of HBU at $7,500/acre - $132,500,000

3 mills at $75 million each - $225,000000

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Total - $1,139,500,000

Debt - ($240,839,000)

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Net - $1,123,661,000

$92.43 per share
Sam Radcliffe's insight:

This is the opinion of Tom Kametz who writes about the timber industry for Seeking Alpha.

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953,446 Deltic Timber shares move: Massachusetts-based company’s stock purchase worth $69 million

953,446 Deltic Timber shares move: Massachusetts-based company’s stock purchase worth $69 million | Timberland Investment | Scoop.it
An investment company bought 7.5 percent of Deltic Timber Corp.’s outstanding stock Thursday, the day after Deltic said it would purchase the remaining interest in an El Dorado-based fiberboard plant.
Sam Radcliffe's insight:

Full article requires subscription. Wellington Management, an asset manager and investment advisor, is the buyer. SEC filing here: http://www.sec.gov/Archives/edgar/data/902219/000090221913000146/sec_filing.htm

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Is Deltic Timber's Cash Machine Empty?

Is Deltic Timber's Cash Machine Empty? | Timberland Investment | Scoop.it

...it pays to take a close look at the components of cash flow from operations, to make sure that the cash flows are of high quality. What does that mean? To me, it means they need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don't appear on the income statement (such as major capital expenditures).

...

When I say "questionable cash flow sources," I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That's not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. 


With 44.5% of operating cash flow coming from questionable sources, Deltic Timber investors should take a closer look at the underlying numbers. Within the questionable cash flow figure plotted in the TTM period above, other operating activities (which can include deferred income taxes, pension charges, and other one-off items) provided the biggest boost, at 31.9% of cash flow from operations. Overall, the biggest drag on FCF came from capital expenditures, which consumed 72.3% of cash from operations.


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Potlatch and Deltic Timber to Combine to Create Leading Timberland REIT and Lumber Manufacturer

Potlatch and Deltic Timber to Combine to Create Leading Timberland REIT and Lumber Manufacturer | Timberland Investment | Scoop.it

Potlatch Corporation (NASDAQ:PCH) (“Potlatch”) and Deltic Timber Corporation (NYSE:DEL) (“Deltic”) today announced that they have entered into a definitive agreement to combine in an all-stock transaction and create a leading domestic timberland owner and top-tier lumber manufacturer. The combined company will be named PotlatchDeltic Corporation and its shares will trade on the Nasdaq Stock Market under the ticker PCH.

 

Based on the closing stock prices of Potlatch and Deltic on October 20, 2017, the combined company is expected to have a pro forma equity market capitalization of approximately $3.3 billion and a total enterprise value of more than $4.0 billion, including approximately $700 million in net debt. Following completion of the transaction, the combined company will have more than 1,500 employees serving over 200 customers through operations across its extensive timberland and lumber manufacturing portfolio.

 

Under the terms of the agreement, which has been unanimously approved by the Boards of Directors of both companies, Deltic stockholders will receive 1.80 common shares of Potlatch stock for each common share of Deltic that they own. Following the close of the transaction, Potlatch stockholders will own approximately 65% of the combined company, and Deltic stockholders will own approximately 35% on a fully diluted basis.

The agreement also provides for Deltic to convert to a REIT structure, effective at the closing date of the transaction, ensuring the combined company achieves the most efficient tax structure.

***

The combination brings together two leading timberland owners and lumber manufacturers. Together, the combined company will have a highly productive and diverse timberland portfolio of approximately 2 million acres, with approximately 1.1 million acres in the U.S. South, 600,000 acres in Idaho, and 150,000 acres in Minnesota. In addition, upon completion of the transaction, the company will operate eight wood products manufacturing facilities, including six lumber manufacturing facilities, one medium density fiberboard (“MDF”) facility and one industrial plywood mill. In total, the combined company will have lumber capacity of 1.2 billion board feet, making it one of the leading producers in the U.S. Furthermore, the company’s lumber capacity will be heavily weighted towards high-margin southern yellow pine lumber, with over half of the company’s capacity being produced at its three southern mills. The transaction also combines two highly complementary and successful real estate businesses.

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Deltic Timber Shares Spike as Filing Reports Buyout Interest

Deltic Timber Shares Spike as Filing Reports Buyout Interest | Timberland Investment | Scoop.it
Shares of Deltic Timber Corp. of El Dorado hit a new 52-week high Wednesday after a filing said the timber and real estate firm had been "approached by multiple parties interested in merging with or acquiring" the company.

In a Schedule 13D filing with the U.S. Securities and Exchange Commission, Southeastern Asset Management Inc. of Memphis said potential suitors had approached it and Deltic about a deal, and that it believes Deltic has hired a financial adviser.

Deltic shares (NYSE: DEL) rose on the news, hitting a new peak of $85.49 on Wednesday before closing at $82.51, up 5.5 percent from the previous day.
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Deltic Timber Corporation Stock Upgraded

Deltic Timber Corporation Stock Upgraded | Timberland Investment | Scoop.it

Deltic Timber Corporation (NYSE:DEL) has been upgraded by TheStreet Ratings from a hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

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