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Tickers in this Article: WY, PCL, BAM, PHM
Weyerhaeuser (NYSE:WY) didn't have the luxury of taking it easy on Father's Day, as the company announced a slew of transactions that could significantly reshape this large timberland and wood products REIT. On balance, the transactions should increase (or at least unlock) value within the company, and the naming of a high-quality CEO should have the company in good shape to take advantage of the slowly building housing recovery. Although Weyerhaeuser is not shockingly cheap, it still looks like a quality name to consider.

Buying More High-Value Timberland
While the hiring of a new CEO will likely have the biggest long-term impact on the company, the acquisition of $2.7 billion in new timberland has the biggest near-term impact on Weyerhaeuser. The company will be acquiring Longview Timber from Brookfield Asset Management (NYSE:BAM) for $2.65 billion. Longview Timber owns 645,000 acres of quality timberland in Washington and Oregon, and this acreage is near Weyerhaeuser's existing Pacific Northwest acreage.

All told, this is a solid transaction but not a cheap one. Weyerhaeuser is paying about $4,100 per acre. That's pretty consistent with transactions in the Northwest, and well above the nationwide average of $1,650 per acre. As an aside, this is why Weyerhaeuser's timberland holdings are more prized than Plum Creek's (NYSE: PCL) by many analysts – Weyerhaeuser is stronger in the higher-value Northwest, and doesn't have the same lower-value Southern assets.

SEE: Timber Investments Cut Down Portfolio Risk

These assets are valuable for multiple reasons. First, the quality of the timber produced is very good and well-suited for building, and it's not exposed to the lower-value pulp/paper business. It's also close to the attractive (on a long-term basis) housing market of California. Last and not least, it's conveniently located for export to China and Japan

A New Man In Charge
Weyerhaeuser also announced that it had appointed Doyle Simmons to become the new CEO of the company. The former CEO of Temple-Inland (which is now owned by International Paper (NYSE: IP)), Mr. Simmons comes to the company with a solid understanding of the timberland and wood products industries, as well as a pretty good record of producing value for shareholders.

Spinning WRECO?
Many investors have long held (and expressed) reservations about WRECO – Weyerhaeuser's homebuilding operations. While owning timberlands and wood/cellulose products businesses makes a certain amount of synergistic sense, extending that argument to homebuilding is a bit of a stretch. So although WRECO is a top-20 builder and owns a strong land position in California, there has been pressure on the company for some time to sell or spin-off this operation. Now it looks like those pressures are leading to action.

Management was cagey about its plans for WRECO, and specifically said that they may elect to keep it, but a sale or spin-off is now at least under active consideration. While the shares of leading homebuilders like Pulte (NYSE: PHM) and Toll Brothers (NYSE: TOL) have come off their highs, the sector has enjoyed a strong recovery over the past two years, and Weyerhaeuser has a solid chance of getting good value for this asset now.

SEE: What Could Happen To The Home Builders Sector In 2013

The Bottom Line
In conjunction with the aforementioned moves, Weyerhaeuer announced a 10% dividend hike. That's not going to lift the yield to an especially high level relative to historical yields on timber REITs, but it's still an improvement.

Weyerhaeuser has also announced some financing events to pay for the Longview deal with Brookfield. The company will be raising close to $800 million through a common stock offering (possibly $900 million if the shoe is exercised), and another $500 million or so through a convertible preferred offering.
When it's all said and done, I see this as a value-additive transaction for Weyerhaeuser. Yes, the company is paying a full price for Longview, but the company should realize some operating synergies, and I believe the long-term profitability and EBITDA value of the assets will validate the price paid. All told, I see Weyerhaeuser worth about $31 to $33 per share on a sum-of-the-parts basis. That doesn't make it a huge bargain today, but high-quality timberland assets rarely go for cheap for very long.

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