Plum Creek Q3 Results Beat View, To Buy MeadWestvaco Forestlands For $1.1 Bln

(RTTNews) - Real restate investment trust Plum Creek Timber Company, Inc. (PCL) on Monday reported a 22 percent increase in profit for the third quarter on higher revenues and lower expenses, with the results beating analysts' estimates. However, the company forecast fourth-quarter earnings below Street expectations.

Separately, the company said it will acquire about 501,000 acres of industrial timberlands and an interest in about 109,000 acres of high-value rural and development-quality lands from from packaging solution provider MeadWestvaco Corp. (MWV) for a total consideration of about $1.1 billion.

Plum Creek's third-quarter net earnings were $72 million or $0.44 per share, up from $59 million or $0.36 per share in the same period last year. The latest quarter's results include a non-cash expense of $4 million or $0.02 per share related to fire losses experienced in Montana and Oregon during the quarter.

On average, 11 analysts polled by Thomson Reuters expects the company to earn $0.42 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the quarter increased 3 percent to $366 million from $354 million in the same period last year. Analysts had a consensus revenue estimate of $359.38 million.

Total costs and expenses for the quarter declined slightly to $275 million from $275 million in the year-ago period.

Rick Holley, Plum Creek's chief executive officer said, "Each business segment performed well. Northern timber markets remain strong and Southern timber markets continue to improve slowly. Our Manufacturing segment posted another strong performance and our Real Estate segment is seeing improving market conditions in some regions."

Looking ahead to the fourth quarter, Plum Creek forecast earnings in a range of $0.26 to $0.31 per share. Analysts expect the company to earn $0.33 per share for the quarter.

In the fourth quarter, the company expects to harvest about 900 thousand tons in its Northern Resources segment and approximately 4 million tons in its Southern Resources segment. For fiscal 2013, Plum Creek Timber expects its full-year harvest to total 17.5 million tons.

Holley said, "We expect fairly stable business conditions during the fourth quarter and are looking forward to continued improvement in timber markets during 2014."

Additionally, Plum Creek said it has entered into a purchase and sale agreement to acquire about 501,000 acres of industrial timberlands, and related assets from MeadWestvaco or MWV for about $1.1 billion.

The assets include MeadWestvaco's U.S. forestlands, an interest in about 109,000 acres of high-value rural and development-quality lands, totaling approximately 501,000 acres in Alabama, Georgia, South Carolina, Virginia and West Virginia.

Plum Creek will acquire the 501,000 acres for $934 million, of which about $74 million will be in cash and $860 million will be in the form of a 10-year installment note from Plum Creek. The transaction also includes the royalty and lease income currently being generated on these lands from coal and wind.

The transaction has been approved by the boards of directors of both companies and is expected to close in the fourth quarter of 2013.

In addition to the U.S. forestland acquisition, Plum Creek will invest in a newly-formed partnership comprised of MWV's approximately 109,000 acres of diversified development lands in the Charleston, S.C., region. Plum Creek will acquire an ownership interest in the partnership for about $152 million in cash, placing an implied value of the partnership at about $530 million.

The partnership will consist of two joint ventures. The first joint venture will contain active development projects. Plum Creek will contribute approximately $12.5 million in cash into this joint venture. MWV will hold a 95 percent interest in the venture, while Plum Creek will hold the remaining 5 percent stake.

The other joint venture will contain long-term development projects. Plum Creek will contribute about $140 million in cash into this joint venture. MWV and Plum Creek will each hold a 50 percent interest in the venture.

Following the completion of the transaction, the timber harvest from the acquired lands is expected to average nearly 3 million tons annually over the next 10 years, growing Plum Creek's total annual harvest more than 15 percent from recent levels. The company expects the mineral and wind assets associated with the timberlands to generate approximately $6 million of annual cash flow, assuming current commodity prices.

Plum Creek intends to offer 14.10 million shares of its common stock of par value $0.01 per share, in an underwritten public offering. In addition, the company plans to grant the underwriters a 30-day option to purchase up to 2.115 million additional shares of its common stock to cover over-allotments. The company intends to use the net proceeds from the offering to finance the acquisition of timberlands and other real estate assets from MWV.

Separately, Richmond, Virginia-based MeadWestvaco said it estimates net proceeds of $950 million from the transaction and expects to return about $665 million of the proceeds to its shareholders. The company will use about $210 million to repay outstanding term loan in order to maintain it investment grade rating. In addition, the company will retain about $75 million in the joint ventures to fund development activities.

Meanwhile, MWV will retain full ownership of its oil and natural gas rights on about 191,000 acres of land in West Virginia that are located over the Marcellus Shale fairway. The company also said it expects to maintain its current quarterly dividend rate of $0.25 per share.

PCL closed Monday's regular trading session at $49.63, down $0.28 or 0.56 percent on a volume of 974,833 shares. However, in after-hours, the stock gained $0.01 or 0.02 percent to $49.64.

MWV closed the regular trading session at $38.77, down $0.54 or 1.37 percent on a volume of 1.08 million shares.