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Update: Potlatch, Deltic Timber to Combine in Stock Swap

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Potlatch Corp. of Spokane, Washington, and Deltic Timber Corp. of El Dorado announced Monday morning that they will combine in a $1.2 billion all-stock transaction, creating “a leading domestic timberland owner and top-tier lumber manufacturer.”

The combined company will be called PotlatchDeltic Corp., and its shares will trade on the Nasdaq Stock Market under the ticker PCH. It will have more than 1,500 employees and more than 200 customers. The corporate headquarters will be in Spokane, with southern operational headquarters in El Dorado.

Deltic, a publicly traded timber and real estate company, announced the combination in a news release.

In August, amid mounting pressure from a shareholder, Deltic executives said the company was continuing a review of “strategic alternatives” but did not set a timetable for completing it.

At the time Deltic said that it “has been approached by a number of industry participants regarding interest in a potential strategic transaction.” It said it has been evaluating proposals while “finalizing internal strategic initiatives” and other options to “maximize shareholder value.”

On Monday, Deltic Chairman Robert C. Nolan said the company’s board of directors was “extremely pleased” that the review led to its combination with Potlatch.

“We are confident that the combined company has the capacity to enhance value greatly in excess of what could be achieved by either company independently,” he said.

The deal comes a little more than a year after Deltic’s longtime CEO, Ray C. Dillon, announced his retirement from the company. Deltic named John D. Enlow, formerly of Weyerhaeuser, as Dillon’s successor in February.

“This partnership with Potlatch not only maximizes value for our stockholders but also provides them with the opportunity to participate in the significant upside potential of this combination,” Enlow said Monday. “Furthermore, uniting our high-quality assets, including our deeply talented and dedicated employees, will greatly enhance the potential of PotlatchDeltic. We look forward to working together to ensure a seamless transition and capitalize on the robust opportunities for growth and success.” 

Monday’s deal has been unanimously approved by the boards both companies. Deltic stockholders will receive 1.80 common shares of Potlatch stock for each common share of Deltic that they own, the companies said.

Following the close of the transaction, Potlatch stockholders will own about 65 percent of the combined company, and Deltic stockholders will own about 35 percent on a fully diluted basis.

Together, the combined company will have a timberland portfolio of about 2 million acres, 1.1 million acres of which are in the South. Another 600,000 acres are in Idaho and 150,000 acres are in Minnesota.

In all, the company will operate eight wood products manufacturing facilities, including six lumber manufacturing facilities, one medium density fiberboard facility and one industrial plywood mill. It will have lumber capacity of 1.2 billion board feet. The deal also combines two real estate businesses; Deltic’s includes the Chenal Valley development in west Little Rock. 

The agreement provides for Deltic to convert to a real estate investment trust structure, effective at the closing date of the transaction, “ensuring the combined company achieves the most efficient tax structure,” the companies said.

The leadership team of the combined firm will include executives from both companies. Potlatch CEO Mike Covey will continue to serve as Chairman and chief executive, and Potlatch’s Eric Cremers will continue as president and COO. Enlow will be the company’s vice chairman and lead the integration of the two businesses.

The board of of the combined company will comprise eight directors from Potlatch and four directors from Deltic, the companies said.

The deal is expected to close in the first half of next year.

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