Potlatch Seeks Value, Balance In Timberland Deal

A complicated merger announced Monday with Anderson-Tully Co. will add balance and value to Potlatch Corp. timber holdings, Chairman John Richards said Tuesday.

The deal envisions a new company, Timberland Growth Corp., that will combine 514,000 acres of Potlatch’s mostly softwood timber holdings in Arkansas with Anderson-Tully’s 324,000 acres of hardwood in Arkansas and Mississippi.

The Anderson-Tully property will be purchased for $410 million from the proceeds of a public stock offering by Timberland Growth, plus borrowings.

Spokane-based Potlatch will take majority ownership in the new company by contributing its Arkansas timber. But Richards said officials won’t know what percent of TGC Potlatch will own until the public offering is completed this spring.

A registration statement will be filed with the U.S. Securities and Exchange Commission later this month, he said.

Potlatch also will buy two sawmills and a veneer plant from Anderson-Tully for $60 million. Richards said the private Memphis-based company, which has been in business since 1889, will discontinue operations when the transaction closes.

“Anderson-Tully, we believe, is the premier hardwood manager in the United States,” he said. “We’re thrilled with the new company.”

Richards stressed that TGC will be independent of Potlatch, which will control only two of seven seats on the new company’s board.

Potlatch will buy all the timber cut by TGC at a price a majority of that board considers fair price, he said.

In addition to the Anderson-Tully mills it will acquire, Potlatch has a sawmill and pulp and paper mill in Arkansas.

Richards said he expects the purchase to affect few of Anderson-Tully’s 500 employees. Potlatch employs 6,700.

The location of TGC’s headquarters has not been determined.

Richards said separating the timberlands from the sawmills and pulp plant will give officials a better understanding of how investors value those assets as more public timber is removed from the market.

“We’re very optimistic,” he said.

Several other timber companies have spun off acreage in recent years to capture more value for shareholders.

Not all have been successful, but Steve Dietrich of Jensen Securities in Portland said such a step by Potlatch was overdue.

“I took this as a positive move,” he said.

Dietrich and others said structuring the deal as an investment trust will minimize tax problems for investors while allowing TGC to conserve cash for the purchase of more timber.

But he added that investors are awaiting more information on the deal before putting their money behind it.

Potlatch stock, he noted, gained only 25 cents to $46 on news that should have produced more activity.

, DataTimes