The Rising Influence of Rising Affluence

[DewDiligence]

Re: WY-PCL merger

First of all, as a longstanding PCL shareholder who has a low average cost, I’m relieved that this deal is fully non-taxable.

As an almost “pure” timberlands play, PCL is unique among publicly-traded companies. However, the post-merger WY will be a very strong timberlands play insofar as timberlands will produce 50% or more of overall sales, assuming a sale or spin-off the cellulose fiber business (http://finance.yahoo.com/news/weyerhaeuser-explore-strategic-alternatives-cellulose-200200755.html ). Thus, I’m comfortable with the prospect of owning WY stock on a long-term basis.

The merger’s exchange ratio—1.6 shares of WY for each share of PCL—equates to a nominal premium of 21% based on Friday’s closing prices of the two stocks. Although a 21% premium is somewhat lower than I might have expected for such a well-run company as PCL, the 21% premium in a fully non-taxable deal is roughly equivalent for me to a 40% premium in a taxable deal, so I really can’t complain.

Moreover, WYE intends to maintain its $1.24/sh annual dividend, so the new dividend per PCL share will be $1.24x1.6 = $1.984—a 13% boost relative to PCL’s current payout of $1.76 (and a yield of 4.9% relative to PCL’s closing price on Friday).

All told, I’m pretty happy with the deal terms and I plan to vote my PCL shares in favor of the merger.