* Weyerhaeuser shareholders to gain control of Tri Pointe
* Tri Pointe land assets to jump 10-fold to 30,000 lots
* Tri Pointe shares jump 16 pct, Weyerhaeuser stock up 2 pct
(Adds CEO quote, analyst comment; updates share price)
By Sagarika Jaisinghani
Nov 4 Tri Pointe Homes Inc is buying
Weyerhaeuser Co's homebuilding division in a $2.7 billion
deal that will give it access to developed land in key markets
such as California and Texas and make it one of the 10 biggest
Weyerhaeuser, whose shareholders will control Tri Pointe
after the deal, had been looking to get rid of its homebuilding
unit as it focuses on its core timber business.
Tri Pointe said its land assets would jump more than 10-fold
after the deal, giving it nine years' worth of lot supply.
That would be more than the average of 7.4 years for the top
five U.S. homebuilders, which include D.R. Horton Inc,
PulteGroup Inc and Lennar Corp, according to
data released by Tri Pointe.
Shares of Tri Pointe rose as much as 16 percent in early
trading, while Weyerhaeuser shares were up 1.5 percent.
Tri Pointe's existing management, including Chief Executive
Officer Doug Bauer, will run the combined entity. Barry
Sternlicht, whose Starwood Capital Group LLC owned a 38 percent
stake in Tri Pointe as of March, will continue as chairman.
"The combined operations of both companies will give the new
Tri Pointe ... a stronger and deeper California market position,
a relatively high average-selling-price product line (and) land
positions and brand recognition in the nation's most attractive
markets," Bauer said on a conference call with analysts.
Weyerhaeuser said in June that the "improving fundamentals"
of the U.S. housing market made it a prudent time to explore
strategic options for its housing business.
M&A activity picked up in 2013 among U.S. homebuilders,
which have been struggling to meet burgeoning demand for new
homes due to a shortage of land ready to build on.
Rather than wait for developers to turn raw land into lots -
a process that takes two to five years - smaller builders such
as Ryland Group Inc and Meritage Homes Corp are
finding it easier to buy companies that have access to land in
"What we're seeing is guys that are really looking for land
opportunity and that's the big deal in the housing space today -
finding land that is still attractively priced," Williams
Financial Group analyst David Williams said.
STRONG LAND BANK
Tri Pointe said it would control about 30,000 lots after the
deal, more than 16,000 of which are in California. The company
currently has about 2,700 lots in the United States.
The deal will also bring brands such as Pardee Homes,
Trendmaker Homes and Maracay Homes under the Tri Pointe
Williams Financial Group's David Williams said Tri Pointe's
strategy to expand via acquisitions makes sense in the current
environment as good land deals are hard to come by for a new
"If you want to take advantage of what's going on in a
market, the most efficient and fast way to do that is to pick up
a builder," he said.
Irvine, California-based Tri Pointe went public in January
and had a market capitalization of about $500 million as of
Friday. It builds houses in California and Colorado for between
$300,000 and $1.5 million.
Weyerhaeuser and Tri Pointe are using a deal structure known
as Reverse Morris Trust - a transaction that allows a parent
company to sell its unit in a tax-efficient manner.
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.
Weyerhaeuser said its shareholders will own 80.5 percent of
the combined company after the deal is completed. They will
receive about $2 billion in Tri Pointe's stock, based on Tri
Pointe's Friday close of $15.38.
The Weyerhaeuser unit, Weyerhaeuser Real Estate Co (WRECO),
will also pay $700 million in cash to its parent.
Weyerhaeuser said some assets of WRECO are excluded from the
deal, which is expected to close by the end of the second
quarter of 2014.
Deutsche Bank Securities is the financial adviser to Tri
Pointe and Gibson, Dunn & Crutcher LLP is the legal adviser.
Sources close to the matter told Reuters on Sunday that Tri
Pointe was nearing a deal to buy WRECO for about $2.7 billion.
Shares of Tri Pointe have risen 9 percent since Reuters
first reported on Oct. 21 that it was in advanced talks to buy
the Weyerhaeuser unit.
They were up 7 percent at $16.52 in late morning trading on
the New York Stock Exchange. Weyerhaeuser's stock was nearly
flat at $30.35.
(Editing by Maju Samuel and Saumyadeb Chakrabarty)