Weyerhaeuser to raise $2.45 billion to buy Longview Timber, expects to up Q3 dividend by 10%

By Lisa Kerner

Charlotte, N.C., June 17 - Weyerhaeuser Co. announced it will acquire Longview Timber LLC from affiliates of Brookfield Asset Management Inc. for $2.65 billion in a transaction slated to close next month.

The deal, which is expected to be immediately accretive to funds available for per-share distribution, will expand Weyerhaeuser's timber holdings in the Pacific Northwest by 33%. Annual synergies of about $20 million are expected within two years of closing.

"In the first quarter of 2013, Longview Timber generated EBITDA of over $43 million and funds available for distribution of over $20 million," said executive vice president and chief financial officer Patty Bedient during a conference call on Monday to discuss Weyerhaeuser's announcement.

President and chief executive officer Dan Fulton said the "one-of-a-kind acquisition is very straightforward" and called it a scaled transaction of high-valued timber "right in our own backyard."

The company plans to raise $2.45 billion and raise its dividend by 10% in conjunction with the transaction.

"We intend the $2.45 billion of financing for the transaction to come from the combination of approximately equal amounts of equity and debt," said Bedient.

"The equity will include a combination of common stock and mandatory convertible preferred stock."

Weyerhaeuser launched equity offerings earlier in the day, said Bedient.

According to Bedient, "the timing and the composition of the debt offering will be announced later."

"We've also obtained a committed senior unsecured bridge facility that provides additional flexibility," said the CFO. "Ultimately, we believe our financing strategy will support our strong capital structure and allow for a sustainable and increasing dividend."

The bridge facility is committed through Morgan Stanley, according to a company news release.

Weyerhaeuser's board is expected to approve a dividend increase subject to completion of transaction.

The dividend will be increased to 22 cents per share, from 20 cents, with the August declaration.

"This will mark our third dividend increase in the last four quarters, or a 47% increase over that same time frame," Bedient said.

Weyerhaeuser also announced its board authorized the exploration of a range of strategic alternatives for Weyerhaeuser Real Estate Co. (WRECO).

The alternatives, according to Fulton, include but are not limited to "continuing to hold and operate WRECO or a merger, sale or spin-off of the business."

Weyerhaeuser, a timber company based in Federal Way, Wash., also announced that Doyle Simons was appointed president and chief executive officer, effective Aug. 1. The board member is serving as CEO elect, effective immediately.

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