Replies to post #11291 on The Rising Influence of Rising Affluence

[jbog]

Although a 21% premium is somewhat lower than I might have expected for such a well-run company as PCL,

I don't know how you value 'a well run company' but it certainly isn't by the return to investors.

[DewDiligence]

WY-PCL CC slides:

http://phx.corporate-ir.net/External.File?t=1&item=VHlwZT0yfFBhcmVudElEPTUyMTE3NTh8Q2hpbGRJRD02MDIwNTI=

[DewDiligence]

WY expects to grow the dividend aggressively during the next few years, according to the CEO on today’s CC.

[DewDiligence]

WY-PCL merger is almost certain to be consummated:

PCL is now trading within a small margin of its implied value in the WY merger (i.e. 1.6 x WY’s share price). The spread is small because this deal is almost certain to close.

There are essentially no antitrust concerns since ownership of US timberlands is highly fragmented and PCL’s non-timberland operations are de minimis.

Moreover, it’s highly unlikely that either company’s shareholders will vote against the merger. Investors who don’t like the deal will be inclined to sell their shares, so by the time the record date for voting arrives, the shareholder base will consist largely of those in favor of the deal.

Finally, WY is probably the only company on the planet with whom PCL would agree to merge, so there is close to a zero chance of another company stepping into the fray.

[DewDiligence]

This WY piece from Barron’s came out on 10/31/15—before the PCL merger announcement:

http://www.barrons.com/articles/weyerhaeusers-earnings-poised-to-rebound-1446267605

Weyerhaeuser’s Earnings Poised to Rebound

In the two years since Doyle Simons took the helm of Weyerhaeuser, he has reshaped the timber giant by slashing costs, shedding one nonstrategic unit, and revitalizing two others, and he’s done it in a challenging operating environment.

…Under Simons, Weyerhaeuser has been more shareholder friendly. In August, it unveiled a 7% hike in its quarterly dividend to 31 cents a share, the fifth increase in four years; since 2011, the payout has risen by 107%, with most of that occurring on Simons’ watch. He also set a new $500 million share repurchase plan to succeed a recently completed $700 million one initiated in 2014. [This, of course, excludes the new $2.5B buyback announced in connection with the PCL merger.]

…Ryan Dobratz, a portfolio manager at Third Avenue Management, with $8 billion in total assets, calls CEO Simons “our internal activist” based on his efforts to improve performance. Third Avenue is betting Weyerhaeuser’s earnings power will be “significantly greater” in two to three years as the housing market reaches a sweet spot and Simons whittles away at the number of outstanding shares.

…Weyerhaeuser shares are a steal. They trade at a 30% discount to net asset value, using a roughly $42-a-share valuation for its businesses. While it boasts the biggest market value–$15 billion–of the publicly traded timber REITs, it’s also the cheapest by key measures.

…As the company further streamlines and focuses more on its core timber holdings, which produce most of its operating income, it is expected to shed more of its wood products businesses over time.

The merger with PCL is a giant step towardn emphasizing WY’s timberlands business and de-emphasizing the manufacturing segment.

[DewDiligence]

PCL trading at 1.57 times WY—very close to the 1.6 exchange ratio in the merger; the narrow gap makes sense insofar as this deal is very likely to be consummated (#msg-118360229).

[DewDiligence]

3-year history of WY-PCL merger discussions:

http://www.sec.gov/Archives/edgar/data/849213/000119312515414898/d97854ddefm14a.htm#tx75536_59 (p53-62)

[DewDiligence]

PCL and WY shareholders approve merger:

http://www.sec.gov/Archives/edgar/data/849213/000119312516462673/d139771dex991.htm
http://www.sec.gov/Archives/edgar/data/106535/000119312516462748/d137730dex991.htm

More than 98% of the votes cast were in favor of the merger. The deal is expected to close no later than the first week in March.