Exclusive: Tri Pointe nears $2.7 billion deal for Weyerhaeuser unit: sources
Tri Pointe Homes Inc is near a deal to buy Weyerhaeuser Co's homebuilding division for about $2.7 billion, which would make it one of the 20 largest homebuilders in the United States, two people familiar with the matter said on Sunday.
The two companies are working toward an announcement possibly as soon as Monday, said the people, who cautioned that the proposed transaction is still subject to last-minute details and that the timetable may yet slip.
Tri Pointe shares have risen more than 9 percent since Reuters first reported on October 21 that the homebuilder, which is backed by Barry Sternlicht's Starwood Capital Group LLC, was in advanced discussions to buy the Weyerhaeuser unit for around $2.7 billion and was trying to finalize an agreement within two weeks.
Under the proposed terms of the deal, the two companies are using a structure known as Reverse Morris Trust - a transaction that allows a parent company to sell its subsidiary in a tax-efficient manner, the people said. In that structure, a company spins off a unit that it wants to divest and that unit merges with a smaller company, but the smaller company runs the combined entity.
Shareholders of Weyerhaeuser are expected to own 80.5 percent of the merged company and Tri Pointe shareholders would own the remaining 19.5 percent, one of the people added.
All the people asked not to be identified because the matter is confidential. Representatives for Tri Pointe did not immediately respond to requests for comment, while Weyerhaeuser and Starwood Capital declined to comment.
Tri Pointe went public in January, one of the first U.S. homebuilders to do so in almost a decade as the housing sector rebounds from the trough of the financial crisis on the back of low mortgage rates and rising prices.
That recovery has slowed in recent months as buyers started to balk at high prices and interest rates edged higher since the summer, yet analysts still expect home sales to pick up again in the near term.
Irvine, California-based Tri Pointe, led by Chief Executive Douglas Bauer, builds houses in California and Colorado. Sternlicht, whose Starwood owns a large stake in the company, is chairman of Tri Pointe.
Timber conglomerate Weyerhaeuser said in June it was considering a range of alternatives for Weyerhaeuser Real Estate Company (WRECO), including whether to continue to hold it, or a merger, sale or spin-off.
It said the business is one of the 20 largest homebuilders in the United States, and that the "improving fundamentals" of the housing market make it a prudent time to explore strategic alternatives for the business.
The Weyerhaeuser unit's biggest brand is Pardee Homes, which builds houses in Southern California and Las Vegas. Its other brands include Trendmaker Homes in Texas and Maracay Homes in Arizona.
Weyerhaeuser, based in Federal Way, Washington, has pared its business lines over several years to focus on its timber business.
In 2006, Weyerhaeuser used a Reverse Morris Trust structure to exit another one of its businesses. It spun off its fine paper business to be combined with Domtar Corp , a deal that left Weyerhaeuser stockholders with 55 percent ownership of the merged company.
(Editing by Matthew Lewis)