SPOKANE, WA–Local timberland company Potlatch Corp. is buying Deltic Timber Corp. in an all-stock transaction to create a timberland REIT that will have a total enterprise value of $4 billion and a pro forma equity market cap of $3.3 billion. The combined company will be called PotlatchDeltic Corp. and it will trade on Nasdaq under the ticker PCH.
Under the terms of the agreement, Deltic stockholders will receive 1.80 common shares of Potlatch stock for each common share of Deltic that they own and will own 65% of the combined company when the deal is closed. It will also convert to a REIT structure at that point.
The combined company will have a timberland portfolio of two million acres, with 1.1 million acres in the US South, 600,000 acres in Idaho and 150,000 acres in Minnesota. The company will also operate eight wood products manufacturing facilities, including six lumber manufacturing facilities, one medium density fiberboard facility and one industrial plywood mill.
“With Deltic, we gain significant scale particularly through nearly one million acres in Arkansas and substantially expanded sawmill capacity,” Mike Covey, chairman and CEO of Potlatch, said in a prepared statement.
“Together, we can realize significant productivity improvements by sharing best practices across both businesses, implementing optimal silvicultural practices, increasing harvest levels and improving lumber manufacturing volumes,” he said.
The combined company expects to realize approximately $50 million after-tax cash synergies and operational efficiencies, with increasing lumber production and harvest volumes comprising slightly over half of the estimated $50 million in synergies, while overhead cost savings and conversion to tax-efficient REIT status make up the remainder.
Mike Covey will continue to serve as Chairman and CEO when the REIT launches and Eric Cremers will continue to serve as president and COO. John Enlow, currently president and CEO of Deltic, will be the company's vice chairman and will lead the integration of the two businesses. The Board of Directors of the combined company will consist of eight directors from Potlatch and four directors from Deltic. The corporate headquarters will be in Spokane, with the southern operational headquarters located in El Dorado, AK.
The transaction is expected to close in the first half of 2018.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
