NEW YORK (TheStreet) Packaging products company MeadWestvaco (MWV) of Richmond, Va., said Monday it would sell its U.S. timberlands to Seattle timber owner Plum Creek Timber (PCL) and form joint ventures with the buyer comprised of MeadWest's development properties around Charleston, S.C., in a $1.5 billion deal.
The transaction will earn MeadWestvaco $1.1 billion, which it will mostly return to shareholders. The seller will no longer hold any timberland in the U.S. following the deal; its one remaining stand will be in the Santa Catarina state of southern Brazil.
The deal should close by the end of the year. It does not require a shareholder vote for either company.
"[This] acquisition meaningfully grows each of Plum Creek's core business segments: timber, land, and non-timber resources. It's a deal that positions us to capitalize on the growth in timber prices we see coming over the next several years from increasing demand, both domestically and internationally," said Plum Creek CEO Rick Holley on a call held to discuss the deal.
"At normalized demand levels of about 1.5 million housing starts, the U.S. South is likely to be called on to produce record levels of lumber and other wood products to help satisfy this demand. This leads directly to growing sawlog demand in the Southern region," Holley added.
MeadWestvaco executives discussed the deal Tuesday, Oct. 29.
"Looking ahead, MeadWestvaco will be even more focused on our core packaging and specialty chemicals business," said MeadWestvaco chairman and CEO John Luke on a Tuesday conference call. "It is an important step in our deliberate and strategic transformation."