Weyerhaeuser Company (NYSE:WY) looking for a new way into lumberland, WEST FRASER TIMBER L (OTCMKTS:WFTBF)
Weyerhaeuser Company (NYSE:WY) revealed that it will be exploring some strategic alternatives in connection with its homebuilding and real-estate development business, Weyerhaeuser Real Estate. Some of the alternatives that the board is considering are continuing to hold as well as operate the business, a sale, a merger or a spin-off. In addition to this, the firm has revealed that it will be acquiring Longview Timber LLC from Brookfield Asset Management Inc’s affiliates for an amount of $2.65B, inclusive of the assumption of any debt. This transaction is subject to the customary closing conditions and the expected close date is July 2013.
WY is acquiring around 645,000 acres of unique and high-quality timberlands located in Oregon and Washington. This land is highly contiguous and complementary with the existing acreage that the company has. The transaction will expand the company’s timber holdings by 33%, in the Pacific Northwest, to around 2.6M acres. It will increase the total amount of United States timberlands that the company either owns or controls to around 6.6M acres. WY expects to reach around $20 million annual synergies within two years of the closing.
The West Coast giant
There has been a recent report on bullish long-term prospects of the West Coast-based forestry mammoth, WEST FRASER TIMBER L (OTCMKTS:WFTBF). The company is the largest lumber producer in North America. The company is hoping that by the end of 2014, the housing recovery in the U.S will be vibrant enough to put forth a strong bid in the lumber market for. One more bullish factor that has emerged is that China has now entered the demand equation. It is now a prominent North American wood-buyer. At the moment it is still pulling-out all its massive stockpiles. However, this is a temporary phase and the country will eventually have to replenish its holdings.
Acceleration in America’s housing recovery indicates that the lumber market will ripen by 2014 end. The sharp rally didn’t have sustaining power and lumber prices have since tumbled since the beginning of 2013. They are down by around 25% from the very recent highs that they had touched. The cold spring in the U.S resulted in a drop in housing starts, while producers had ramped up their production. This price drop should be viewed as a good entry-point opportunity for investors who are following lumber stocks like Weyerhaeuser Company (NYSE:WY) and WEST FRASER TIMBER L (OTCMKTS:WFTBF).