This morning before U.S. markets opened for trading, CatchMark Timber Trust Inc (CTT:NYSE), which is exclusively focused on ownership of prime timberland in the southern U.S. and leading U.S. lumber producer PotlatchDeltic Corp. (PCH:NASDAQ), announced that the two companies have entered into a definitive all-stock merger agreement.
Based upon the closing price of each company's respective shares on Friday, May 27, 2022, the combined firm is projected to have a market capitalization exceeding $4 billion and a total enterprise value of greater than $5 billion.
The merger agreement terms provide that existing CatchMark common shareholders will each receive 0.23 shares of PotlatchDeltic stock for each CatchMark share owned. According to the news release, this represents a price of $12.88 per share for CatchMark shares and is 55% higher than CatchMark's share's closing price on the prior trading day, May 27, 2022. When the merger is finalized, PotlatchDeltic and CatchMark stockholders will respectively own 86% and 14% of the combined company.
The companies advised that the acquisition of CatchMark Timber Trust by PotlatchDeltic will serve to further strengthen and diversify PotlatchDeltic's position as a leading integrated timber real estate investment trust (REIT) with over 2.2 million acres of diversified timberland properties in Idaho, Minnesota and six southern U.S. states.
PotlatchDeltic's President and CEO Eric J. Cremers commented, "With CatchMark, we gain significant scale in three states and diversify our timberland holdings into some of the strongest markets in the U.S. South. In addition, the location of CatchMark's land near large population centers provides attractive rural real estate sales opportunities. PotlatchDeltic will retain a strong balance sheet and liquidity after the merger is completed, providing a platform for continued growth."
CatchMark Timber Trust's President and CEO Brian M. Davis remarked, "This partnership with PotlatchDeltic unlocks value for our stockholders and positions us well for sustainable success over the long term…We look forward to working together as we integrate our two companies and capitalize on the robust opportunities for growth and success."
The companies stated that utilizing the combined strengths of these two great timber REITs will allow the newly merged firm to benefit from significant strategic and financial opportunities that would not be possible by either company on a standalone basis. The firm stated that the deal is expected to create compelling synergies of $16 million annually and will be accretive to cash available for distribution.
PotlatchDeltic noted that the acquired CatchMark assets will deliver a meaningful increase in stable cash flow that is projected to contribute $55 million annually to EBITDDA during the next five years.
The firms stated that the merger transaction has already been unanimously approved by each company's respective Board of Directors and is expected to close in H2/22, but remains subject to approval by CatchMark Timber's shareholders, ordinary closing conditions and regulatory approvals.
When the merger is completed, the corporate headquarters will be maintained in Spokane, Wash. and the company will also maintain a regional office will be in Atlanta, Ga. Under the terms of the agreement, the Board of Directors of the combined company will consist of ten member directors, nine from PotlatchDeltic and one from CatchMark.
CatchMark Timber Trust is headquartered in Atlanta, Ga. and is strictly focused on owning and operating timberlands that are proximal to the nation's leading mill markets. The company endeavors to generate sustainable yields and attain the highest value per acre achievable. The REIT owns interests in prime timberlands in the southern U.S. encompassing over 365,000 acres which offer approximately 13.9Mt of merchantable timber. Pine acreage accounts for about 72% of CatchMark's forested resources.
PotlatchDeltic is a leading U.S. lumber producer based in Spokane, Wash. The company, which is structured as a real estate investment trust (REIT), owns about 1.8 million acres of timberlands in Alabama, Arkansas, Louisiana, Mississippi, Minnesota and Idaho. In addition, the firm owns six sawmills, a plywood mill, residential and commercial property development businesses and a rural timberland sales program. The firm's sawmills in aggregate are capable of producing around 1.1 billion board feet of lumber each year.
CatchMark Timber started off the day with a market cap of around $400.8 million with approximately 49.25 million shares outstanding. CTT shares opened 38% higher today at $11.46 (+$3.16, +38.07%) over Friday's $8.30 closing price. The stock has traded today between $11.43 and $12.39 per share and closed for trading at $11.79 (+$3.49, +42.05%).
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