TRI Pointe To Gain Weyerhaeuser Subsidiary

IRVINE, CA-The board of directors for TRI Pointe Homes Inc. has approved a definitive agreement in which Weyerhaeuser Real Estate Co. will combine with a subsidiary of TRI Pointe. WRECO is a wholly owned homebuilding and real estate subsidiary of Weyerhaeuser Co.

The transaction, valued at approximately $2.7 billion, is expected to close by the end of the second quarter of 2014. It will establish TRI Pointe as one of the 10 largest homebuilders in the US based on estimated combined equity market value and will provide Weyerhaeuser shareholders with the opportunity to own shares in one of the largest homebuilders in the country.

As part of the deal, TRI Pointe will acquire five distinct market-leading brands with operations in key growth markets: Pardee Homes in Southern California and Las Vegas, Trendmaker Homes in Texas, Maracay Homes in Arizona, Winchester Homes in the Washington, DC metro area and Quadrant Homes in the Puget Sound region of Washington State. These companies own or control approximately 27,000 lots primarily located in high-growth, lot-constrained markets. The transaction is consistent with TRI Pointe's strategy to “build a strong regional homebuilder focused on the nation's most attractive housing markets,” according to the firm.

“Today's announcement is an important milestone for our organization as it transforms TRI Pointe into one of the leading players in the homebuilding industry,” says Doug Bauer, TRI Pointe's CEO. “Our mission from day one has been to be the next-generation homebuilder, and this transaction uniquely positions us to build on our established momentum, expand our footprint and capitalize on new growth opportunities. This is exciting news for our shareholders, employees and customers, and we look forward to delivering more top-quality homes across the country.”

Barry Sternlicht, chairman of the board at TRI Pointe, adds, “Doug and the management team have built TRI Pointe rapidly through a dedication to innovative designs and strong customer commitment. Both organizations share a disciplined, hands-on approach, leveraging strong local market relationships, and they have established reputations for delivering quality homes on budget and on schedule to drive shareholder value.”

The strategic benefits of the acquisition from TRI Pointe's perspective including enhancing the firm's geographic presence, deepening its California footprint, expanding its land holdings, providing a best-in-class management team and increasing market capitalization and liquidity.

Under the terms of the transaction agreement, Weyerhaeuser will distribute ownership of WRECO to Weyerhaeuser shareholders in either a spin-off or split-off transaction, which will be immediately followed by a merger of WRECO with a subsidiary of TRI Ponte, with WRECO surviving the merger and becoming a wholly owned subsidiary of TRI Pointe. If Weyerhaeuser elects a spin-of, all Weyerhaeuser shareholders will participate pro-rate.

In a split-off, Weyerhaeuser will conduct an exchange offer pursuant to which its shareholders will elect whether to exchange Weyerhaeuser shares for WRECO shares. Weyerhaeuser will determine which approach it will take prior to closing the transaction, and no decision has been made at this time. Regardless of the method, upon closing of the merger, Weyerhaeuser shareholders will receive approximately 80.5% of TRI Pointe share on a fully diluted basis and pre-transaction TRI Pointe shareholders will own the balance of TRI Pointe shares.

The transaction comprises 130-million shares of TRI Pointe common stock, valued at $2 billion, based on the closing market price of TRI Pointe's shares on November 1, and, immediately prior to the distribution of WRECO, an approximately $700-million cash payment from WRECO to Weyerhaeuser, which will be retained by Weyerhaeuser after the closing of the transaction. The amount of the cash payment to Weyerhaeuser is subject to adjustment based on the terms set forth in the transaction agreement. Upon closing, TRI Pointe will have approximately 16.1 million shares outstanding. The transaction is expected to be tax-free for both companies and their shareholders.

Also, under the terms of the transaction agreement, certain assets of WRECO will be excluded from the transaction and retained by Weyerhaueser. TRI Pointe has financing commitments from Citigroup and Deutsche Bank Securities for this transaction. TRI Pointe and WRECO will continue to operate separately until the transaction closes.

Bauer, Tom Mitchell and Mike Grubbs will continue to serve as CEO, president and COO, and CFO, respectively, of TRI Pointe upon closing of the transaction, and TRI Pointe's headquarters will remain here in Irvine. Barry Sternlicht will continue as chairman of the board of TRI Pointe, and Bauer will also continue as a director. TRI Pointe will expand its board from seven to nine directors, and Weyerhaeuser will select four of the nine directors for appointment to the board.

Upon closing of the transaction, there will be no immediate changes to the operations of WRECO's multiple brands and operating subsidiaries. TRI Pointe intends to provide the necessary resources to support WRECO's employees and the continued growth of each brand. Deutsche Bank Securitiesis serving as financial adviser to TRI Pointe--with Fried Frank acting as counsel to Deutsche Bank--and Gibson, Dunn & Crutcher LLP is TRI Pointe's legal advisor.

As GlobeSt.com reported in August, TRI Pointe Homes, Inc. recently opened several new developments in California and Colorado, as the company continues to expand its homebuilding operations in the western United States.