FEDERAL WAY, WA—Consolidation is coming to the timber REIT sector. Weyerhaeuser Co. and Plum Creek said Sunday that they would merge, with Weyerhaeuser paying about $8.4 billion to acquire its rival in an all-stock transaction.

The combined company is expected to have an equity value of $23 billion based on current share prices. Weyerhaeuser and Plum Creek say the merged entity, which will continue trading under the Weyerhaeuser stock ticker, will be "the world's premier timber, land and forest products company" with more than 13 million acres of timberland across the US.

Weyerhaeuser president and CEO Doyle R. Simons says the new company will create "tremendous benefit for shareholders as we drive value through shared best practices, economies of scale, cost synergies, operational excellence and disciplined capital allocation. Our customers and employees will also benefit as we form a winning team with common values and unparalleled expertise in timber, land and manufacturing."

Simons will continue in both capacities at the helm of the merged company. Plum Creek CEO Rick Holley will serve as non-executive chairman of Weyerhaeuser's board, which will be expanded to 13 directors, including Simons and Holley.

Subject to shareholder approval and customary closing conditions, the merger is expected to close in late first-quarter or early Q2 2016. Following closing, Weyerhaeuser and Plum Creek shareholders will own approximately 65% and 35%, respectively, of the combined company's common stock.

Weyerhaeuser plans to execute a $2.5-billion share repurchase shortly after the merger's closing. As previously announced, Weyerhaeuser intends to move its headquarters to Seattle in mid-'16. It has been based in the Tacoma area since its founding by Frederick Weyerhaeuser in 1900.

For Weyerhaeuser, Morgan Stanley is serving as financial advisor and Cravath, Swaine & Moore LLP is serving as legal counsel. Goldman Sachs is serving as lead financial advisor to Plum Creek, with Bank of America Merrill Lynch also serving as a financial advisor to the company. Skadden, Arps, Slate, Meagher & Flom LLP is serving as Plum Creek's legal counsel.

Separately, Weyerhaeuser said Sunday that its board had authorized the exploration of strategic alternatives for its Cellulose Fibers business, including continuing to hold and operate the business or a sale or spin-off. "We believe now is the right time to evaluate all options to ensure the best long-term results for this business and at the same time create the most value for our shareholders by further focusing our portfolio," says Simons.

The Cellulose Fibers business includes five pulp mills, two modified fiber mills, one liquid packaging board facility, and one publishing papers joint-venture facility. Cathy Slater will continue to lead this business as SVP of Cellulose Fibers throughout the review process.