Why it jumped 42.22% today

  • Catchmark Timber Trust Inc (NYSE: CTT) stock price rose 42.22% today. That is why.

Catchmark Timber Trust Inc (NYSE: CTT) stock price rose 42.22% today. Investors respond to PotlatchDeltic (Nasdaq: PCH) and CatchMark Timber Trust by announcing that they have reached a definitive agreement to combine in an all-stock transaction. The acquisition by PotlatchDeltic will strengthen and diversify a leading integrated forestry REIT and continue to enhance shareholder value.

Based on the closing stock prices of PotlatchDeltic and CatchMark on May 27, 2022, the combined company is expected to have a pro forma market capitalization of over $4 billion and a total enterprise value of over $5 billion. , including $557 million in net debt.

Under the terms of the agreement, which was unanimously approved by the board of directors of both companies, CatchMark shareholders will receive 0.23 shares of PotlatchDeltic common stock for each share of CatchMark common stock they own. And that reflects a price per share of $12.88 for each share of CatchMark common stock, and a 55% premium to CatchMark’s common stock price at the close of business on May 27, 2022. After the close of Following the transaction, PotlatchDeltic shareholders will own approximately 86% of the combined company and CatchMark shareholders will own approximately 14% on a fully diluted basis.

The combination brings together two high-quality forest REITs, resulting in PotlatchDeltic owning approximately 2.2 million acres of diversified forest land, including 626,000 acres in Idaho and more than 1.5 million acres in reinforcement markets in the southern United States. And PotlatchDeltic also remains the timber REIT with the most influence on lumber prices, including 1.1 billion board feet of lumber capacity. The transaction also combines two successful and complementary real estate activities.

The combination offers significant strategic and financial opportunities beyond what could be achieved by either company on a stand-alone basis, including through:

1.) This combination will result in geographic diversity and scale, increasing PotlatchDeltic’s ownership in the southern United States to over 1.5 million acres of forest land in six states. The transaction adds approximately 350,000 acres of superior site index forest land in Alabama, South Carolina and Georgia. CatchMark’s timberlands are in some of the strongest markets in the southern United States, with a strong base of well-capitalized customers. PotlatchDeltic and CatchMark share a desire to continue to manage forest lands sustainably using best management practices and third-party certification.

2.) This combination will result in a diversified real estate portfolio with CatchMark’s forest lands located near major population centers. PotlatchDeltic will leverage its rural land sales expertise and strategy, along with CatchMark’s local market knowledge, to maximize rural real estate sales opportunities. These opportunities include potential conservation and solar transactions.

3.) Annual cash available for distribution (CAD) synergies are estimated at $16 million, reflecting reduced overhead and elimination of public enterprise expenses, internalization of forest land management, and reduction interest charges by refinancing CatchMark’s debt. And PotlatchDeltic expects run rate synergies to be realized by the end of the first full year after the merger closes. PotlatchDeltic expects the transaction to be accretive to cash available for distribution (“CAD”) per share in the first full year, excluding costs to achieve synergies and assuming the execution rate of full synergies.

4.) EBITDA contributed by CatchMark is expected to average $55 million per year over the first five years, assuming full synergy execution.

5.) A strong balance sheet, with a pro forma combined debt-to-enterprise value ratio of approximately 10%, will allow PotlatchDeltic to remain flexible and take advantage of other capital allocation opportunities. The addition of CatchMark cash flow and CAD synergies provides a strong hedge for PotlatchDeltic’s attractive and growing dividend.

Composition of the Board and Headquarters

The combined company’s board of directors will be comprised of 9 directors from PotlatchDeltic and one director from CatchMark. Headquarters will remain in Spokane, Washington. A regional office will be maintained in Atlanta, Georgia.

The deal is expected to close in the second half of 2022. And the deal requires CatchMark shareholder approval and is subject to the satisfaction of customary closing conditions and regulatory approvals. Due to the transaction, CatchMark has postponed its 2022 annual meeting of shareholders which was scheduled for June 14, 2022.

KEY QUOTES:

“We are excited to increase shareholder value by combining PotlatchDeltic and CatchMark. With CatchMark, we are gaining significant scale in three states and diversifying our timber holdings into some of the strongest markets in the southern United States. Additionally, the location of CatchMark land near major population centers provides attractive rural real estate sales opportunities. PotlatchDeltic will retain a strong balance sheet and liquidity after the merger is complete, providing a platform for continued growth. We also remain committed to responsible environmental, social and governance strategies.

— Eric J. Cremers, President and CEO of PotlatchDeltic

“This partnership with PotlatchDeltic unlocks value for our shareholders and positions us well for long-term sustainable success. By bringing together our high quality assets and our dedicated and talented employees, we will greatly increase the potential of PotlatchDeltic. We look forward to working together as we integrate our two companies and capitalize on the strong opportunities for growth and success.”

— Brian M. Davis, President and CEO of CatchMark

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.

Richard L. Militello