Combined Company will Have Diversified Timberland
Base of Approximately 2 Million Acres, 1.2 Billion Board Feet of
Lumber Capacity and 300 Million Square Feet of Panel
Capacity
Potlatch Corporation (NASDAQ:PCH) (“Potlatch”) and Deltic Timber
Corporation (NYSE:DEL) (“Deltic”) today announced that they have
entered into a definitive agreement to combine in an all-stock
transaction and create a leading domestic timberland owner and
top-tier lumber manufacturer. The combined company will be named
PotlatchDeltic Corporation and its shares will trade on the Nasdaq
Stock Market under the ticker PCH.
A file accompanying this release is available
at http://www.globenewswire.com/NewsRoom/AttachmentNg/cff07af4-a123-46f9-8394-6b97d13d262d
Based on the closing stock prices of Potlatch and Deltic on
October 20, 2017, the combined company is expected to have a pro
forma equity market capitalization of approximately $3.3 billion
and a total enterprise value of more than $4.0 billion, including
approximately $700 million in net debt. Following completion of the
transaction, the combined company will have more than 1,500
employees serving over 200 customers through operations across its
extensive timberland and lumber manufacturing portfolio.
Under the terms of the agreement, which has been unanimously
approved by the Boards of Directors of both companies, Deltic
stockholders will receive 1.80 common shares of Potlatch stock for
each common share of Deltic that they own. Following the close of
the transaction, Potlatch stockholders will own approximately 65%
of the combined company, and Deltic stockholders will own
approximately 35% on a fully diluted basis.
The agreement also provides for Deltic to convert to a REIT
structure, effective at the closing date of the transaction,
ensuring the combined company achieves the most efficient tax
structure. As part of the REIT conversion process, Deltic’s
accumulated earnings and profits, which are estimated to be
approximately $250 million, will be distributed to stockholders of
the combined company through a dividend consisting of 80% stock and
20% cash by the end of 2018.
The combination brings together two leading timberland owners
and lumber manufacturers. Together, the combined company will have
a highly productive and diverse timberland portfolio of
approximately 2 million acres, with approximately 1.1 million acres
in the U.S. South, 600,000 acres in Idaho, and 150,000 acres in
Minnesota. In addition, upon completion of the transaction, the
company will operate eight wood products manufacturing facilities,
including six lumber manufacturing facilities, one medium density
fiberboard (“MDF”) facility and one industrial plywood mill. In
total, the combined company will have lumber capacity of 1.2
billion board feet, making it one of the leading producers in the
U.S. Furthermore, the company’s lumber capacity will be heavily
weighted towards high-margin southern yellow pine lumber, with over
half of the company’s capacity being produced at its three southern
mills. The transaction also combines two highly complementary and
successful real estate businesses.
Mike Covey, Chairman and Chief Executive Officer of Potlatch,
said, “With this transaction, we unite two great timber companies
uniquely positioned to drive value for our stockholders and
benefits for our customers, partners and employees. The
complementary businesses make us a natural fit. With Deltic, we
gain significant scale particularly through nearly one million
acres in Arkansas and substantially expanded sawmill capacity.
Together, we can realize significant productivity improvements by
sharing best practices across both businesses, implementing optimal
silvicultural practices, increasing harvest levels and improving
lumber manufacturing volumes. We look forward to completing the
transaction and are confident that together we will create a
top-tier timber REIT.”
Robert C. Nolan, Chairman of Deltic, said, “Earlier this year,
the Deltic Board of Directors began a comprehensive assessment of a
range of options aimed at maximizing value for Deltic stockholders.
The Board is extremely pleased that this process led to our
combination with Potlatch, as we believe it offers the best path
toward achieving our shared goals. We are confident that the
combined company has the capacity to enhance value greatly in
excess of what could be achieved by either company
independently.”
John Enlow, President and Chief Executive Officer of Deltic,
said, “This partnership with Potlatch not only maximizes value for
our stockholders but also provides them with the opportunity to
participate in the significant upside potential of this
combination. Furthermore, uniting our high-quality assets,
including our deeply talented and dedicated employees, will greatly
enhance the potential of PotlatchDeltic. We look forward to working
together to ensure a seamless transition and capitalize on the
robust opportunities for growth and success.”
Potlatch and Deltic: A Stronger Platform for
Growth
The combination offers significant strategic and financial
opportunities beyond what could be achieved by each company on a
standalone basis, notably through:
- Complementary Acreage and Operations. The
combination will result in approximately 933,000 acres in Arkansas
and northern Louisiana, as well as sawmill capacity of 630 million
board-feet (“MMBF”) within Arkansas. Operational synergies are
expected to be achieved through expanded harvest volumes as well as
increased lumber production. The company will benefit from sharing
of best-in-class practices across both companies to optimize
silviculture, logistics and lumber manufacturing productivity, as
well as the ability to achieve operational efficiencies through
integrating systems and resources. Further, the combined company
will be the timber REIT with the most exposure to strengthening
lumber markets and to continued improvement in U.S. housing.
- Compelling Synergy Opportunities. The combined
company expects to realize approximately $50 million after-tax cash
synergies and operational efficiencies, driven by a combination of
corporate and operational synergies. Increasing lumber production
and harvest volumes comprise slightly over half of the estimated
$50 million in synergies, while overhead cost savings and
conversion to tax-efficient REIT status make up the remainder.
Potlatch and Deltic expect run rate synergies to be achieved by the
end of the second year, with additional opportunities over the
longer term.
- Robust Financial Profile. The transaction will
create enhanced scale to drive future growth, with combined market
capitalization of over $3 billion and enterprise value of over $4
billion. Cash available for distribution (“CAD”) per share will be
accretive in the first full year post-close and 5% CAD accretive in
year two. The combined company is committed to achieving an
investment grade credit rating.
- Stronger Stockholder Returns. Both companies
intend to maintain dividend payments through completion of the
transaction and in a separate news release Potlatch has announced
an increase of its annual dividend from $1.50 per share to $1.60
per share, beginning in the fourth quarter of 2017.
Leadership, Board Composition and
Headquarters
The leadership team will comprise top talent from both
companies. Upon closing of the transaction, Mike Covey will
continue to serve as Chairman and CEO, and Eric Cremers will
continue to serve as President and COO. John Enlow, currently
President and CEO of Deltic, will serve as the company’s Vice
Chairman and will lead the integration of the two businesses.
The Board of Directors of the combined company will comprise
eight Directors from Potlatch and four Directors from Deltic.
The corporate headquarters will be maintained in Spokane,
Washington, with the southern operational headquarters located in
El Dorado, Arkansas.
Timing and Approvals
The transaction is expected to close in the first half of 2018.
The transaction requires the approval of stockholders of both
Potlatch and Deltic and is subject to the satisfaction of customary
closing conditions and regulatory approvals.
Advisors
BofA Merrill Lynch is serving as financial advisor and Perkins
Coie LLP is serving as legal advisor to Potlatch. Goldman Sachs
& Co. LLC is serving as financial advisor and Davis Polk &
Wardwell LLP is serving as legal advisor to Deltic.
Conference Call Information
The two companies will host a joint conference call today at
5:30 a.m. Pacific Time / 8:30 a.m. Eastern Time to discuss this
transaction. Investors may access the webcast at
www.potlatchcorp.com by clicking on the Investor Resources link or
by conference call at 1-866-393-8403 for U.S./Canada and
1-706-679-7929 for international callers. Participants will be
asked to provide conference I.D. number 90286636.
A replay of the conference call will be available two hours
following the call until October 30, 2017 by calling 1-800-585-8367
for U.S./Canada or 1-404-537-3406 for international callers.
Callers must enter conference I.D. number 90286636 to access the
replay.
In a separate news release, Potlatch announced its financial
results for the third quarter of 2017. Immediately prior to the
discussion of the transaction, Potlatch will discuss its financial
results for the quarter. In light of today’s announced agreement
with Deltic, Potlatch has cancelled its previously scheduled 2017
third quarter earnings call on Tuesday, October 24, 2017 at 9:00
a.m. Pacific Time / 12:00 p.m. Eastern Time.
About Potlatch
Potlatch is a Real Estate Investment Trust (REIT) with
approximately 1.4 million acres of timberland in Alabama, Arkansas,
Idaho, Minnesota and Mississippi. Potlatch, a certified forest
practices leader, is committed to providing superior returns to
stockholders through long-term stewardship of its forest resources.
The company also conducts a land sales and development business and
operates wood products manufacturing facilities through its taxable
REIT subsidiary. More information about Potlatch can be found on
the company’s website at www.potlatchcorp.com.
About Deltic
Deltic Timber Corporation is a natural resources company focused
on the efficient and environmentally responsible management of its
land holdings. The Company owns approximately 530,000 acres of
timberland, operates two sawmills and a medium density fiber-board
plant, and is engaged in real estate development. Headquartered in
El Dorado, Arkansas, the Company’s operations are located primarily
in Arkansas and north Louisiana.
ADDITIONAL INFORMATIONThis communication is
being made in respect of the proposed merger transaction involving
Potlatch Corporation (“Potlatch”) and Deltic Timber Corporation
(“Deltic”). This communication does not constitute an offer to sell
or the solicitation of an offer to buy any securities or a
solicitation of any vote or approval, nor shall there be any sale
of securities in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of such jurisdiction. In connection with
the proposed merger, Potlatch and Deltic will file relevant
materials with the Securities and Exchange Commission (“SEC”),
including a Potlatch registration statement on Form S-4 that will
include a joint proxy statement of Potlatch and Deltic and also
constitutes a prospectus of Potlatch. Potlatch and Deltic also plan
to file other documents with the SEC regarding the proposed merger
transaction and a definitive joint proxy statement/prospectus will
be mailed to stockholders of Potlatch and Deltic. BEFORE MAKING ANY
VOTING OR INVESTMENT DECISION, SECURITY HOLDERS OF POTLATCH AND
DELTIC ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS
REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS
CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
The joint proxy statement/prospectus, as well as other filings
containing information about Potlatch and Deltic will be available
without charge, at the SEC’s Internet site (http://www.sec.gov).
Copies of the joint proxy statement/prospectus and the filings with
the SEC that will be incorporated by reference in the joint proxy
statement/prospectus can also be obtained, when available, without
charge, from Potlatch’s website at http://www.Potlatchcorp.com
under the Investor Resources tab (in the case of documents filed by
Potlatch) and on Deltic’s website at https://www.Deltic.com under
the Investor Relations tab (in the case of documents filed by
Deltic).
Potlatch and Deltic, and certain of their respective directors,
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies
from the stockholders of Deltic and Potlatch in respect of the
proposed merger transaction. Certain information about the
directors and executive officers of Potlatch is set forth in its
Annual Report on Form 10-K for the year ended December 31, 2016,
which was filed with the SEC on February 17, 2017, its proxy
statement for its 2017 annual meeting of stockholders, which was
filed with the SEC on April 3, 2017 and its Current Report on Form
8-K, which was filed on May 1, 2017. Certain Information
about the directors and executive officers of Deltic is set forth
in its Annual Report on Form 10-K for the year ended December 31,
2016, which was filed with the SEC on March 7, 2017, its proxy
statement for its 2017 annual meeting of stockholders, which was
filed with the SEC on March 20, 2017, its supplement to the proxy
statement for its 2017 annual meeting of the stockholders, which
was filed with the SEC on March 30, 2017 and its Current Reports on
Form 8-K, which were filed with the SEC on September 1, 2017, May
2, 2017, March 8, 2017 and February 27, 2017. Other
information regarding the participants in the proxy solicitations
and a description of their direct and indirect interests, by
security holdings or otherwise, will be included in the joint proxy
statement/prospectus and other relevant documents filed with the
SEC when they become available.
CAUTION ABOUT FORWARD-LOOKING STATEMENTSThis
communication contains certain forward-looking information about
Potlatch and Deltic that is intended to be covered by the safe
harbor for “forward-looking statements” provided by the Private
Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact are forward-looking statements. In
some cases, you can identify forward-looking statements by words
such as “may,” “hope,” “will,” “should,” “expect,” “plan,”
“anticipate,” “intend,” “believe,” “estimate,” “predict,”
“potential,” “continue,” “could,” “future” or the negative of those
terms or other words of similar meaning. These forward-looking
statements include, without limitation, statements relating to the
terms and closing of the proposed transaction between Potlatch and
Deltic, the proposed impact of the merger on Potlatch’s financial
results, the estimated distribution of Deltic’s accumulated
earnings and profits, and the integration of Deltic’s operations.
You should carefully read forward-looking statements, including
statements that contain these words, because they discuss the
future expectations or state other “forward-looking” information
about Potlatch and Deltic. A number of important factors could
cause actual results or events to differ materially from those
indicated by such forward-looking statements, many of which are
beyond the parties’ control, including the parties’ ability to
consummate the transaction or satisfy the conditions to the
completion of the transaction, including the receipt of stockholder
approvals, the receipt of regulatory approvals required for the
transaction on the terms expected or on the anticipated schedule;
the parties’ ability to meet expectations regarding the timing,
completion and accounting and tax treatments of the transaction;
the possibility that any of the anticipated benefits of the
proposed merger will not be realized or will not be realized within
the expected time period; the risk that integration of Deltic’s
operations with those of Potlatch will be materially delayed or
will be more costly or difficult than expected; the failure of the
proposed merger to close for any other reason; the effect of the
announcement of the merger on customer relationships and operating
results (including, without limitation, difficulties in maintaining
relationships with employees or customers); dilution caused by
Potlatch’s issuance of additional shares of its common stock in
connection with the merger; the possibility that the merger may be
more expensive to complete than anticipated, including as a result
of unexpected factors or events; the diversion of management time
on transaction related issues; the estimation of Deltic’s
accumulated earnings and profits is preliminary and may change with
further due diligence; general competitive, economic, political and
market conditions and fluctuations, including changes in interest
rates, credit availability, adverse weather, cost and availability
of materials used to manufacture products, natural gas pricing and
volumes produced; changes in the regulatory environment; the
cyclical nature of the industry in which the parties operate; and
the other factors described in Potlatch’s Annual Report on Form
10-K for the fiscal year ended December 31, 2016 and in its most
recent Quarterly Reports on Form 10-Q filed with the SEC, or
described in Deltic’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2016 and its most recent Quarterly Reports
on Form 10-Q filed with the SEC. Potlatch and Deltic assume no
obligation to update the information in this communication, except
as otherwise required by law. Readers are cautioned not to place
undue reliance on these forward-looking statements, all of which
speak only as of the date hereof.
Contacts
For Potlatch(Investors)Jerry
Richards1-509-835-1521
(Media)Mark Benson1-509-835-1513
For DelticAnna Torma1-870-
881-6463ir@deltic.com
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