Replies to post #11286 on The Rising Influence of Rising Affluence

[jbog]

Nice

[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.

[DewDiligence]

(WY/PCL)—US housing starts reached 1.173M* in November, +10.5% YoY:

http://www.wsj.com/articles/u-s-housing-starts-surge-10-5-in-november-1450273007

In a key development, construction is picking up not just in apartments but in single-family homes, too. Starts in the latter category—reflecting two-thirds of the market—reached a nearly eight-year high in November.

Single-family homes use more lumber per unit than multi-family dwellings.

PCL forecasts 1.25M housing starts in 2016 (#msg-118004826).

*Seasonally-adjusted annualized rate.

[DewDiligence]

WY sells pulp business to IP for $2.2B ($1.6B after taxes) in cash:

http://finance.yahoo.com/news/weyerhaeuser-sell-cellulose-fibers-pulp-120000904.html

The transaction includes five pulp mills located in Columbus, Miss.; Flint River, Ga.; New Bern, N.C., Port Wentworth, Ga. and Grande Prairie, Alberta, with a combined total capacity of nearly 1.9 million metric tons. The sale also includes two modified fiber mills in Columbus, Miss. and Gdansk, Poland.

The announcement completes the first phase of the company's strategic review of the Cellulose Fibers business. The transaction with International Paper does not include Weyerhaeuser's liquid packaging board facility or newsprint and publishing papers joint-venture. Weyerhaeuser's review of those assets is ongoing.

Divestiture of WY’s entire cellulose-fibers business was contemplated when WY merged with PCL. When such divestitures are completed, WY will be a purer play on timberlands assets—i.e. more similar to what PCL was.