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PotlatchDeltic (PCH) to Buy CatchMark, Expands Timberland REIT

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PotlatchDeltic Corporation’s PCH shares fell 6.35% on May 31, after the company announced the acquisition of an Atlanta-based real estate investment trust or REIT, CatchMark Timber Trust, Inc. CTT.

Buyout Synergies

Per the deal, CatchMark stockholders will receive 0.23 common shares of PotlatchDeltic stock for each common share they own and a 55% premium to CatchMark’s stock price as of May 27.

Post completion of this buyout, PotlatchDeltic’s stockholders will have approximately 86% of the combined company, and CatchMark stockholders will own approximately 14% fully diluted.

PotlatchDeltic will now own approximately 2.2 million acres of diversified timberlands including 626,000 acres in Idaho and more than 1.5 million acres in six states of the U.S. South. It also remains the timber REIT with the most leverage to lumber prices, including 1.1 billion board feet of lumber capacity.

The combined company will have a diverse real estate portfolio, including CatchMark’s timberlands located close to large population centers and local market knowledge and PotlatchDeltic’s rural land sales expertise and strategy.

Based on the closing stock prices of both the companies on May 27, the new company is likely to have a pro forma market capitalization of more than $4 billion and a total enterprise value of approximately $5 billion, including $557 million in net debt.

Moreover, PotlatchDeltic expects nearly $55 million annually of EBITDA contributed by CatchMark over the first five years, assuming full synergies run rate. Also, it estimates the transaction to be accretive to Cash Available for Distribution ("CAD") per share in the first year. Annual synergies from CAD are estimated to be $16 million, reflecting reduced overhead and the elimination of public company expenses, insourcing timberland management and reducing interest expense by refinancing CatchMark’s debt. The addition of CatchMark’s cash flows and CAD synergies will help PotlatchDeltic to remain flexible and take advantage of capital allocation opportunities.

The transaction is expected to close in the second half of 2022, subject to certain approval of stockholders of CatchMark, and the satisfaction of customary closing conditions and regulatory approvals.

The Zacks Rank #3 (Hold) company’s shares have outperformed the Zacks Building Products – Wood industry in the year-to-date period. Earnings estimates for 2022 have also moved up 7% in the past 30 days, reflecting analysts’ optimism over the company’s growth potential. The company has a solid earnings surprise history, having surpassed the Zacks Consensus Estimate in 12 of the trailing 14 quarters.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Picks

Louisiana-Pacific Corporation LPX or LP is a leading manufacturer of sustainable, quality engineered wood building materials, structural framing products and exterior siding. This Zacks Rank #1 stock has been benefiting from solid demand from the U.S. residential market and repair and remodeling (R&R) business. Strategic business transformation, effective cash management and inorganic moves are likely to boost its future performance.

The Zacks Consensus Estimate for LPX’s 2022 earnings has moved up to $14.87 per share from $13.02 in the past 30 days.

Weyerhaeuser Company WY is one of the leading U.S. forest product companies. This Zacks Rank #1 stock has been benefiting from solid new residential construction activity, which in turn is leading to improved demand. Also, its focus on operational excellence has been advantageous over time.

The Zacks Consensus Estimate for WY’s 2022 earnings has moved up to $3.20 per share from $2.83 in the past 30 days.


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LouisianaPacific Corporation (LPX) : Free Stock Analysis Report
 
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CatchMark Timber Trust, Inc. (CTT) : Free Stock Analysis Report
 
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