Weyerhaeuser's Plum Creek acquisition to create $23 billion timber company

Timber giant Weyerhaeuser Co will buy Plum Creek Timber Co. Inc., creating a $23 billion timber, land and forest firm, the largest the United States.

The merger, which was announced Sunday, will keep the Weyerhaeuser name. It will have more than 13 million acres of timberland under its name, Reuters reported. According to the company, the acquisition will drive economies of scale and capitalize on the recovery of the US housing industry.

In Reuter's report Plum Creek Chief Executive Officer Rick Holley said, "Both companies have historically looked to grow their timberland resource asset base, in other words, to acquire more timberlands, so here's an opportunity for both of us to accomplish that."

In a report by Bloomberg Business, Plum Creek stakeholders will receive 1.6 shares of Weyerhaeuser for every share they own. The deal is expected to push through late in the first quarter of 2016 or early in next year's second quarter. The deal has 21 percent premium in the closing price of Plum Creek on Friday. Weyerhaeuser will pull off a $2.5 billion stock buyback after the deal is completed. The merger is expected to help the company save up to $100 million of annual cost. Weyerhaeuser Chief Executive Officer Doyle Simons will still be the head of the merged company, while Holley will have the non-executive chairman position.

The International Business Times reported that Weyerhaeuser's closing price on Friday was $30.40 a share. Meanwhile, Plum Creek has 174 million outstanding shares. Based on these two figures, the acquisition could be worth $8.4 billion. Plum Creek owns almost 6.2 million acres of timberland. It has a market capitalization of almost $7 billion. Weyerhaeuser, on the other hand, owns $6.9 million worth of timberland all over the US. The company is worth $15.5 billion.

According to Holley, the merger will attract more investors foreign and domestic, especially considering the fact that it is a real estate investment trust and is popular with those who want to enter the timber industry.