Basics of the transaction
As we saw in the first part of this series, Weyerhaeuser (WY) is buying Plum Creek Timber (PCL) in a stock-for-stock merger. The equity value of the transaction is about $8.4 billion and $11.4 billion if you include debt. Shareholders will receive 1.6 shares of Weyerhaeuser for each share of Plum Creek Timber they own. The transaction is scheduled to close at the end of the first quarter or early in the second quarter of 2016. This timeline is going to be a function of the antitrust review, which could be difficult since the largest private owners of forest are merging, and they are much larger than their rivals.
The following conditions need to be satisfied in order for the Plum Creek Timber-Weyerhaeuser merger to close:
- Plum Creek Timber shareholder vote
- Weyerhaeuser shareholder vote
- The Securities and Exchange Commission’s approval of the proxy statement
- WBA’s filing of a PNR (premerger notification report) to comply with the Hart-Scott-Rodino Antitrust Improvements Act
No-shop provisions and breakup fees
PCL has a no-shop provision with a “fiduciary out,” which means that it cannot talk to other potential purchasers while the transaction is pending. However, the “fiduciary out” does allow PCL to talk to a bidder who makes an unsolicited approach if the Board of Directors believes such talks can lead to a bona fide superior offer.
If Plum Creek Timber accepts a superior bid, it will owe Weyerhaeuser a termination fee of $250 million. If Weyerhaeuser accepts a bid from someone who doesn’t want to own Plum Creek Timber and terminates the deal, it will owe Plum Creek Timber a termination fee of $250 million.
Other merger arbitrage resources
Other important deals include the merger between Cigna Corporation (CI) and Anthem (ANTM), which is set to close at the end of 2016. For a primer on risk arbitrage investing, read “Merger Arbitrage Must-Knows: A Key Guide for Investors.”
Investors who are interested in trading in the REIT sector can look at the Vanguard REIT ETF (VNQ).