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The Deal: Tri Pointe Soars on Weyerhaeuser Unit Merger

NEW YORK (TheStreet) --   Weyerhaeuser (WY - Get Report) said Monday that it has a deal to combine its homebuilding unit with Tri Pointe Homes  (TPH) in a $2.7 billion transaction that would leave the timber developer's shareholders in control of the combined entity.

Post-deal, the new Tri Pointe would be a top 10 homebuilder with more than 27,000 lots in constrained markets including southern California, Puget Sound, Arizona, Nevada and Washington, D.C. The company, which is backed by Barry Sternlicht's Starwood Capital Group LLC, operates under brands including Pardee Homes, Trendmaker Homes and Maracay Homes.

Shares of Tri Pointe were jumping 11% to $17.09 while Weyerhaeuser was adding 0.2% to $30.40.

Terms of the deal call for Federal Way, Wash.-based Weyerhaeuser shareholders to receive about $2 billion in Tri Pointe stock, resulting in them owning about 80.5% of the combined company post-merger. The homebuilding operation,Weyerhaeuser Real Estate Co., would also pay its parent $700 million in cash at close.

Post-deal, Sternlicht would continue as chairman of Tri Pointe, with the company's board expected to expand from seven to nine and Weyerhaeuser selecting four directors. Current CEO Doug Bauer would remain in that role at Tri Pointe, which would retain its Irvine, Calif., headquarters.

Bauer in a statement called the deal "an important milestone for our organization," transforming a second-tier company into a homebuilding giant.

"Our mission from day one has been to be the next-generation homebuilder, and this transaction uniquely positions us to build on our established momentum, expand our footprint and capitalize on new growth opportunities," Bauer said. "This is exciting news for our shareholders, employees and customers, and we look forward to delivering more top-quality homes across the country."

Weyerhaeuser, which ranks as one of the world's largest owners of timberlands, said that the combination would create a stronger presence in the homebuilding business.

"The combined company will be a strong standalone homebuilder, and the separation of our homebuilding division allows us to focus on driving performance in our forest products businesses to deliver further value to our shareholders," company CEO Doyle Simons said in a statement. "We have great respect for TRI Pointe's proven management team and are confident in their ability to ensure [Weyerhaeuser Real Estate Co.] achieves its full potential."

Weyerhaeuser received financial advice fromCitigroup Inc.'s Rich Moriarty andJoe RaultIII at Morgan Stanley, and legal counsel fromRichard Halland Eric Tavzel ofCravath, Swaine & Moore LLP.

Tri Pointe was advised byDeutsche Bank Securities Inc.and aGibson, Dunn & Crutcher LLPteam led byMichael Flynn.

Michael GordonatSidley Austin LLPadvised Starwood.

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