Following is before they announced special divident of $26/share...
I looked at all of Weyerhaeuser’s (WY) assets except for its most valuable ones - the timberlands. The 5.7 million acres of timberlands that Weyerhaeuser directly owns constitutes the company’s most valuable asset, and changes in tax law notwithstanding, Weyerhaeuser is going to have to take some serious restructuring action if it wants to boost its stock price anytime soon. That leaves two major options: selling the timberlands to a timberland investment management organization (TIMO) or converting into a tax-advantaged REIT structure.
A sale of timberland assets to a TIMO has been seen as plausible by Deutsche Bank contacts as recently as mid-December, despite the possible transaction size. How big would such a deal have to be? Pre-tax, earnings from Weyerhaeuser’s Timberlands segment have averaged $700 million in the last two years - an amount that looks to be approximately in-line with long-term averages when one-time events are excluded. With the style of TIMOs, these earnings should essentially be treated as a perpetuity - and industry returns (the discount for this valuation) seem to be in the range of 4-5%. That suggests a pre-tax value somewhere between $14 billion and $17.5 billion for the timberland assets, however, this excludes the holdings Weyerhaeuser includes under the “corporate and related” heading - namely, the 50% interests the company has in two partnerships that operate plantations in Uruguay. While I can’t find any clear breakout of those in Weyerhaeuser’s financial reports, Note 7 of the 2006 10-K indicates $64 million in operating income from (what I believe to be) those assets. This seems like a reasonable number to progress with, and on a lower discount of 3% to reflect the higher forest growth rates and lower cost of those assets, it suggests another $2.1 billion in value for a combined pre-tax sum of $16.1 billion.
'Courts of bankruptcy are essentially courts of equity, and their proceedings inherently are proceedings in equity.'
