Boston, MA 11/04/2013 (wallstreetpr) – One of the largest owners of private timberland in United States, Plum Creek Timber Co. Inc. (NYSE:PCL) has announced a public offering of 12.1 million common shares priced at $45. Company intends to use the proceeds to par fund its $1.1 billion purchase of Southern Timberlands. Company plans to buy more than 500,000 acres of timberlands of industrial nature and properties rich in minerals and wind related assets in states of Georgia, Virginia, South Carolina and Alabama. This purchase would cost the company an approximate $870 million. Company also intends to make an investment in a strategic joint venture, which would down and operate more than 109,000 acres of high-value rural lands near Charleston. This part of the deal would require Plum Creek to shell out almost $150 million. And company would also be spending close to $65 million to purchase miner rights, wind power assets and certain subsurface rights associated with some of these timberlands.
All in all, company intends to spend more than $1.1 billion to add these assets to its existing portfolio of more than 6.8 million acres of timberland which it owns across 20 states in United States. Once the deal is closed, company will initially pay $226 million in cash to the seller. Alongwith this, company would also issue a $860 million ten-year installment note. And once the deal is through, company expects its new timberlands to deliver 3 million tons of timber annually for next ten years. This would actually require the company to grow the annual harvest of existing timberlands by more than 10% from most recent levels. Other mineral rights and wind assets are projected to be capable of generating $6 million in annual cash flows for company.
Markets’ initial reaction to the deal was not positive and shares tanked by almost 10% within hours of announcement. It seems that market is negatively viewing the deal structure in which Plum Creek wants to fund the deal using 65% equity and 35% debt.
