) announcement that it was selling its homebuilding and real
estate company, WRECO to
TRI Pointe Homes, Inc.
) created some stir in the company's share price. The shares rose
a few cents after the announcement and ended at a gain of 0.1% on
Nov 4, over its previous day's closing price.
The deal between the two parties requires Weyerhaeuser to use
either a spin-off or split-off transaction method, which at
current levels has not been decided upon. Any method used will
merge WRECO with a subsidiary of Tri Pointe.
Talking about the financial aspects of the transaction,
Weyerhaeuser's shareholders will receive approximately 130
million shares or 80.5% of the combined company's shares and $700
million in cash. The rest of the 19.5% shares will be allotted to
pre-transaction shareholders of Tri Pointe. Combining the two
payment modes, the transaction has been valued at $2.7 billion.
The transaction is anticipated to work in the best interests of
Weyerhaeuser's shareholders as it will be treated as a tax-free
transaction for the company. Also, separation of this
homebuilding unit will free resources that the company can
utilize for its core forest products business.
Completion is pending upon receipt of regulatory approvals along
with the approval of Tri Pointe's shareholders and will likely
consummate in the second quarter 2014.
We believe the aforementioned transaction, when fully complete,
will bode well for Weyerhaeuser's growth prospects. Currently,
the Zacks Consensus Estimate for the company is $1.14 for 2013
and $1.34 for 2014, representing year-over-year growth of 97.3%
and 16.8%, respectively.
Weyerhaeuser currently carries a Zacks Rank #3 (Hold). Other
stocks to watch out for in the sector are
Universal Forest Products Inc.
) with a Zacks Rank #1 (Strong Buy) and
DXP Enterprises, Inc.
) with a Zacks Rank #2 (Buy).
DXP ENTERPRISES (DXPE): Free Stock Analysis
TRI POINTE HOME (TPH): Free Stock Analysis
UNIVL FST PRODS (UFPI): Free Stock Analysis
WEYERHAEUSER CO (WY): Free Stock Analysis
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