Two lumber companies with a combined land mass of 2 million acres are near a deal to combine, The Wall Street Journal reports.
The all-stock deal would see the two hundred-year-old lumber companies, Potlatch Corp (PCH) and Deltic Timber Corp (DEL), become one entity operating under the name PotlatchDeltic. On Friday, the companies closed with a combined value of over $3 billion, with Potlatch ($2.2 billion) shares at $53 and Deltic ($1.1 billion) at $89.12.
The merger would allow the companies to compete with larger industry players such as Weyerhaeuser Co. In addition, Potlatch would pass its real-estate investment trust (REIT) tax status to Deltic. REIT status allows a company to pass its profits directly to shareholders. The conversion is expected to allow $250 million to be distributed to the new company’s shareholders.
Potlatch’s Mike Covey will serve as chairman and chief executive of the new company, keeping the role he holds at Potlatch. Deltic’s John Enlow, currently CEO, will act as vice chairman and oversee integration. The companies expect to see around $50 million in synergies.
Deltic has been under pressure from Southeastern Asset Management Inc, a shareholder, to “explore a sale”. Earlier this year, there was speculation that Deltic could face a hostile takeover. Both Potlatch and Weyerhaeuser were mentioned as potential interested parties.