Weyerhaeuser Closes WRECO Spilt-Off to Tri Ponte - Analyst Blog

Weyerhaeuser Company WY yesterday announced the successful divestment of its homebuilding and real estate company, WRECO to TRI Pointe Homes, Inc. TPH. The split-off resulted in WRECO becoming a wholly owned subsidiary of TRI Pointe Homes.

As part of the transaction, each share of Weyerhaeuser was converted into 1.7003 common shares of WRECO, which, in turn, were converted into 1.297 shares of TRI Pointe Homes. Effectively, each share of Weyerhaeuser was exchanged for 2.2053 common shares of Tri Pointe (i.e., shareholders with $1.00 worth of Weyerhaeuser's shares received $1.05 worth of Tri Pointe's shares).

In addition, Weyerhaeuser received $700 million in cash and reduced its shares outstanding by 58.8 million. The whole transaction will stimulate the company's growth prospects, as freed up resources can be utilized for the core forest products business. Moreover, the transaction will be tax-free for the participating shareholders.

Results from the divested business will be recorded as discontinued operations starting the quarter ending Jun 30, 2014, while a net gain from the transaction is expected to be recorded in the quarter ending Sep 30.

Weyerhaeuser's share price has risen by 10.9% since Nov 4, 2013, the day on which WRECO's divestiture to TRI Pointe Homes was first announced. Currently, the Zacks Consensus Estimate is pegged at $1.35 for 2014 and $1.66 for 2015. Earnings are anticipated to grow by 5.0% over the next five years.

With a $19.4 billion market capitalization, Weyerhaeuser presently carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the building products industry include Lennox International, Inc. LII and United Rentals, Inc. URI, each holding a Zacks Rank #2 (Buy).
 

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