Tri Pointe Homes To Buy Weyerhaeuser Homebuilding Unit In $2.7 Bln Deal

(RTTNews) - Forest products company Weyerhaeuser Co. (WY) Monday said it has entered into a definitive agreement for its home-building subsidiary Weyerhaeuser Real Estate Company or WRECO to combine with a subsidiary of TRI Pointe Homes, Inc. (TPH) in a Reverse Morris Trust transaction.

The deal, which also includes a cash payment of $700 million to Weyerhaeuser, is valued at $2.7 billion based on TRI Pointe's November 1 closing stock price.

The combination will result in Weyerhaeuser shareholders receiving 130 million shares or 80.5 percent of the combined company, with shareholders of TRI Pointe prior to the deal owning the remaining.

The transaction is expected to be tax-free for Weyerhaeuser and its shareholders and is estimated to close during the second quarter of 2014. According to Weyerhaeuser, this combination will create a market-leading home-builder with considerable long-term growth potential.

Doyle Simons, Weyerhaeuser's CEO, said, "As a result of the strategic review of our home-building business, the Board of Directors has determined that combining Weyerhaeuser Real Estate Company with TRI Pointe creates the greatest value for our shareholders."

Simons added that the combined company would be a strong standalone home-builder. According to him, the separation of the home-building division allows the firm to focus on driving performance in its forest products businesses.

Weyerhaeuser will distribute ownership of WRECO to Weyerhaeuser shareholders in a spin-off or split-off transaction, which will be followed by a merger of WRECO with a subsidiary of TRI Pointe. WRECO will survive the merger and become a wholly owned subsidiary of TRI Pointe.

The transaction is expected to be tax-free for both companies and their shareholders. Under the terms of the agreement, some assets of Weyerhaeuser's real estate business will be excluded from the transaction and will be retained by Weyerhaeuser.

Barry Sternlicht will continue as Chairman of the TRI Pointe Board of Directors, which will be expanded to nine from seven directors. Weyerhaeuser will select four directors to the Board, while TRI Pointe will select five.

TRI Pointe said separately that the deal would establish it as one of the 10 largest home-builders in the U.S. based on estimated combined equity market value. The firm will acquire five distinct market-leading brands - Pardee Homes, Trendmaker Homes, Maracay Homes, Winchester Homes and Quadrant Homes - with operations in key growth markets.

These companies own or control around 27,000 lots primarily located in high-growth, lot-constrained markets. TRI Pointe said the transaction is consistent with its strategy to build a strong regional home-builder focused on the nation's most attractive housing markets.

Doug Bauer will continue to serve as chief executive officer of TRI Pointe. Tom Mitchell and Mike Grubbs will continue as president and chief operating officer, and chief financial officer, respectively. TRI Pointe will continue to be based in Irvine, California.

Citigroup and Morgan Stanley are serving as financial advisors to Weyerhaeuser, while Cravath, Swaine & Moore LLP is its legal advisor.

Deutsche Bank Securities is serving as financial advisor to TRI Pointe and Gibson, Dunn & Crutcher LLP is its legal advisor.

WY closed at $30.34 on Friday. TPH settled at $15.38.