Weyerhaeuser buying Brookfield’s Longview Timber for $2.65B

TORONTO—Canadian real estate investment giant Brookfield Asset Management Inc. is selling its Longview forestry units in the United States in deals totalling nearly $3.7-billion.

Weyerhaeuser Co., a major lumber producer based in Washington state, is buying Brookfield’s Longview Timber for $2.65-billion, including debt.

KapStone Paper and Packaging, headquartered north of Chicago in Northbrook, Ill., will acquire Longview Fibre Paper and Packaging for $1.025-billion from Toronto-based Brookfield.

The Toronto-based company acquired the Longview assets in 2007 as one business and has since separated the timberlands from the manufacturing businesses.

Brookfield said it expects to get $250-million cash for Longview Fibre Paper and $600-million cash for Longview Timber after debt and investor payments.

In addition, its affiliate Brookfield Infrastructure (TSX:BIP.UN) will receive $470-million in net proceeds from the timberlands deal.

“While the timing of the sale transactions is coincidental, for investors in our funds these transactions represent monetization at excellent returns and puts each of these assets into the hands of strategic buyers who will be able to take them to the next level,” Cyrus Madon, senior managing partner in Brookfield’s private equity group, said in a statement.

Brookfield and its affiliates have also recently announced a number of other deals in the forestry sector, which is beginning to show signs of revival from a severe slump related to the downturn in U.S. housing and changing demand for pulp and paper because of the economic downturn and a switch to digital media.

The company announced on May 21 that Blue Wolf Capital Partners and Atlas Holdings would be buying Brookfield’s controlling stake in Twin Rivers Paper Company Inc., which operates mills in New Brunswick and Maine.

Financial terms of those deals weren’t disclosed.

Brookfield Infrastructure announced it had completed the sale of the remainder of its Canadian B.C. Coastal timberland operations for net proceeds of approximately $170-million on June 7.

“The sale of our timberland assets was an opportunity to further our strategy of monetizing lower yielding assets to recycle capital into our utilities, transport and energy businesses,” said Sam Pollock, chief executive officer of Brookfield Infrastructure.

He said the timberlands were being sold at attractive prices, reflecting the most recent appraisals.

Pollock said Brookfield Infrastructurre will seek to seek to re-invest these proceeds to achieve a targeted after-tax annual return on equity of 12 to 15 per cent.

As part of its deal with Brookfield, Weyerhaeuser is acquiring 645,000 acres of high-quality timberlands in Washington and Oregon that are near the company’s existing lands.

Weyerhaeuser said that the deal will expand its timber holdings in the Pacific Northwest by a third, to about 2.6 million acres, and increase the total amount of U.S. timberlands it owns or controls to about 6.6 million acres.

Weyerhaeuser says it intends to increases its quarterly dividend by 10 per cent to 22 cents per share from 20 cents per share, beginning with the third quarter dividend that’s payable in September.

It also said that it’s exploring strategic alternatives for its real estate company that could include a merger, a sale or spin-off of the business.