Weyerhaeuser Acquiring High-Quality Timberlands in Alabama

Rhea-AI Summary

Weyerhaeuser Company (NYSE: WY) has announced the acquisition of 84,300 acres of high-quality timberlands in Alabama for $244 million. These acquisitions, secured through multiple transactions, are expected to enhance the company's Southern Timberlands portfolio with mature, highly productive lands well-integrated with existing operations. Key highlights include:

- Located in one of the strongest inland sawlog and fiber markets in the U.S. South
- 74% planted pine acreage with strong site productivity
- Expected average harvest of 6.4 tons per acre annually over the first 10 years
- Anticipated average Adjusted EBITDA of $150 per acre annually from timber operations

This move aligns with Weyerhaeuser's goal to grow its Timberlands portfolio through $1 billion in disciplined investments by the end of 2025. Upon completion, Weyerhaeuser will own or manage approximately 695,000 acres of timberlands in Alabama.

Positive

• Acquisition of 84,300 acres of high-quality timberlands for $244 million
• Expected to deliver portfolio-leading cash flow and harvest tons per acre
• Anticipated average Adjusted EBITDA of $150 per acre annually from timber operations
• Aligns with $1 billion investment target for Timberlands portfolio growth
• Expands Weyerhaeuser's presence in strong inland sawlog and fiber markets

Negative

• Significant capital expenditure of $244 million for the acquisitions
• Potential integration challenges with existing operations
• Dependency on market conditions in the U.S. South timber industry

Insights

Financial Analyst

Weyerhaeuser's acquisition of 84,300 acres of high-quality timberlands in Alabama for $244 million is a significant move that aligns with the company's strategic growth plans. This bolt-on acquisition is expected to enhance the company's Southern Timberlands portfolio and expand its footprint in attractive markets.

The deal's financials are compelling. With an expected average Adjusted EBITDA of $150 per acre annually from timber operations over the first decade, this translates to approximately $12.5 million in annual EBITDA. This represents a 5.1% annual return on investment, which is quite attractive in the timberland industry.

The acquisition's productivity metrics are noteworthy:

• 74% planted pine acreage
• Average harvest of 6.4 tons per acre annually
• Total expected harvest of 540,000 tons annually

These figures suggest the acquired lands are highly productive and well-managed, which should contribute positively to Weyerhaeuser's operational efficiency and profitability.

Moreover, this acquisition brings Weyerhaeuser closer to its strategic goal of $1 billion in disciplined timberland investments by the end of 2025. With this deal, the company will have completed approximately $775 million of investments, demonstrating strong progress towards its target.

For investors, this acquisition signals Weyerhaeuser's commitment to growth and value creation in its core business. The company's disciplined approach to expansion and focus on high-quality assets in strong markets should be viewed positively, as it has the potential to drive long-term shareholder value.

Market Research Analyst

Weyerhaeuser's strategic acquisition in Alabama is a calculated move that capitalizes on the robust timber market in the U.S. South. This region is known for its strong inland sawlog and fiber markets, which bodes well for the company's long-term profitability and market position.

The timing of this acquisition is particularly noteworthy. The U.S. housing market has been experiencing volatility, but the long-term outlook for wood products remains positive due to factors such as housing shortages and the increasing use of mass timber in construction. By expanding its high-quality timberland holdings, Weyerhaeuser is positioning itself to meet future demand and potentially benefit from rising timber prices.

Furthermore, this acquisition enhances Weyerhaeuser's economies of scale in Alabama. Post-acquisition, the company will own or manage approximately 695,000 acres of timberlands in the state, along with two mills, a Timberlands office and a seed orchard. This increased presence could lead to operational synergies and strengthen Weyerhaeuser's competitive position in the region.

The company's statement about the asset class appreciating in value over time reflects a broader trend in the timberland investment space. Timberlands are increasingly seen as a hedge against inflation and a stable long-term investment, which could attract more institutional investors to companies like Weyerhaeuser.

For investors, this acquisition demonstrates Weyerhaeuser's commitment to strategic growth and its confidence in the long-term value of timberland assets. It also highlights the company's ability to identify and secure high-quality properties in competitive markets, which is important for maintaining a leading position in the industry.

Bolt-on additions will further enhance Southern Timberlands portfolio and expand footprint in attractive markets

SEATTLE, July 25, 2024 /PRNewswire/ -- Weyerhaeuser Company (NYSE: WY) today announced acquisitions totaling 84,300 acres of high-quality timberlands in Alabama for $244 million. Secured through multiple transactions, the collective acreage is comprised of mature, highly productive timberlands that are well-integrated with existing Weyerhaeuser operations. Additionally, the acquisitions are expected to deliver portfolio-leading cash flow and harvest tons per acre within the company's Southern Timberlands business.

Key attributes of the acquisitions:

• Located in one of the strongest inland sawlog and fiber markets in the U.S. South
• Fee ownership with 74 percent planted pine acreage and strong site productivity
• Mature planted pine age class expected to produce an average harvest of 6.4 tons per acre (or 540,000 tons) annually over the first 10 years
• Expected average Adjusted EBITDA of approximately $150 per acre (or $12.5 million) annually from timber operations over the first 10 years

"These transactions represent attractive opportunities to enhance our portfolio with high-quality, well-managed timberlands that generate solid returns for our shareholders," said Devin W. Stockfish, president and chief executive officer. "In addition, they demonstrate our disciplined approach to timberlands growth and reinforce our longer-term outlook that the asset class will appreciate in value over time. Including these transactions, we will have completed approximately $775 million against our target to grow our Timberlands portfolio through $1 billion of disciplined investments by the end of 2025."

Of the multiple transactions involved, one closed in the second quarter of 2024 for $48 million. The remaining transactions are under contract and expected to close by year end, subject to customary closing conditions. When all acquisitions are finalized, Weyerhaeuser will own or manage approximately 695,000 acres of timberlands in Alabama, along with two mills, a Timberlands office and seed orchard — employing more than 350 people in the state.

ABOUT WEYERHAEUSER
Weyerhaeuser Company, one of the world's largest private owners of timberlands, began operations in 1900 and today owns or controls approximately 10.5 million acres of timberlands in the U.S., as well as 14 million acres of timberlands managed under long-term licenses in Canada. Weyerhaeuser has been a global leader in sustainability for more than a century and manages 100 percent of its timberlands on a fully sustainable basis in compliance with internationally recognized sustainable forestry standards. Weyerhaeuser is also one of the largest manufacturers of wood products in North America and operates additional business lines around real estate, climate solutions, energy and natural resources, among others. In 2023, the company generated $7.7 billion in net sales and employed approximately 9,300 people who serve customers worldwide. Operated as a real estate investment trust, Weyerhaeuser's common stock trades on the New York Stock Exchange under the symbol WY. Learn more at www.weyerhaeuser.com.

NON-GAAP FINANCIAL MEASURES
This news release references forward-looking estimates of Adjusted EBITDA, which is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold and special items. Adjusted EBITDA should not be considered in isolation from, and is not intended to represent an alternative to, our GAAP results. We have not provided a reconciliation of this forward-looking non-GAAP financial measure to the most comparable GAAP measure of net income because Adjusted EBITDA, as we define it, excludes the impact of certain items listed above in our definition of Adjusted EBITDA, and management cannot estimate these items or the impact they will have on Adjusted EBITDA on a forward-looking basis without unreasonable effort. As a result, investors may be unable to accurately compare the expected impact of the acquisitions to our historical results or the results or expected results of other companies that may have treated such matters differently. Nonetheless, management believes that providing this forward-looking non-GAAP information about the acquisitions is useful to investors, and given the uncertain nature of forward-looking statements, we believe investors are able to take into account the inherent limitations of this forward-looking non-GAAP information. We cannot predict the occurrence, timing or amount of any of the items that we exclude from our Adjusted EBITDA estimate. Accordingly, the actual effect of these items, when determined, could potentially be significant to the calculation of Adjusted EBITDA and actual results may differ materially from our estimate.

FORWARD-LOOKING STATEMENTS
This news release contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, with respect to the company's expectations concerning the occurrence, timing and expected financial contributions and economic results of its acquisitions of certain Alabama timberlands, including expected synergies, Adjusted EBITDA, Adjusted EBITDA per acre and average annual harvest tons. Forward-looking statements may be identified by our use of certain words in such statements, including without limitation words such as "expected," and "will" and similar words, terms and phrases using such terms and words. We also reference expected performance through, or events to occur by or at, a future date, and such references also constitute forward-looking statements. All forward-looking statements speak only as of the date hereof, are based on current expectations and involve and are subject to a number of assumptions, risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These risks and uncertainties include, but are not limited to, those identified in our 2023 Annual Report on Form 10-K, as well as those set forth from time to time in our other public statements, reports, registration statements, prospectuses, information statements and other filings with the Securities and Exchange Commission. In addition, Weyerhaeuser may not be able to complete the remaining portions of the transaction within the stated time period, or at all, because of a number of factors, including without limitation: the occurrence of any event, change or other circumstances that could give rise to a termination of the transaction under the terms of the purchase and sale agreement governing the transaction, or the failure to satisfy other closing conditions. There is no guarantee that any of the events anticipated by these forward-looking statements will occur. If any of the events occur, there is no guarantee what effect they will have on the company's business, results of operations, cash flows, financial condition and future prospects. The company undertakes no obligation to update these forward-looking statements after the date of this news release.

For more information contact:

Weyerhaeuser
Analysts – Andy Taylor, 206-539-3907
Media – Nancy Thompson, 919-861-0342

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SOURCE Weyerhaeuser Company

FAQ

How many acres of timberland is Weyerhaeuser (WY) acquiring in Alabama?

Weyerhaeuser (WY) is acquiring 84,300 acres of high-quality timberlands in Alabama through multiple transactions.

What is the total value of Weyerhaeuser's (WY) timberland acquisitions in Alabama?

The total value of Weyerhaeuser's (WY) timberland acquisitions in Alabama is $244 million.

What is the expected average Adjusted EBITDA from the newly acquired timberlands for Weyerhaeuser (WY)?

Weyerhaeuser (WY) expects an average Adjusted EBITDA of approximately $150 per acre annually from timber operations over the first 10 years.

How does this acquisition align with Weyerhaeuser's (WY) investment goals?

This acquisition contributes to Weyerhaeuser's (WY) target of growing its Timberlands portfolio through $1 billion of disciplined investments by the end of 2025.

What will be Weyerhaeuser's (WY) total timberland ownership in Alabama after these acquisitions?

After completing these acquisitions, Weyerhaeuser (WY) will own or manage approximately 695,000 acres of timberlands in Alabama.