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IRVINE, Calif. (AP) - Tri Pointe Homes Inc. is combining with Weyerhaeuser Co.'s homebuilding business in a deal valued at about $2.7 billion, looking to become a bigger player in the sector as the housing market continues its recovery.
Tri Pointe said Monday that the transaction will make it one of the 10 biggest U.S. homebuilders based on estimated combined equity market value.
Until now, Tri Pointe's primary focus has been on midrange to upscale single-family homes in major metropolitan areas in southern and northern California. It recently added the Colorado market to its portfolio, but the deal with Weyerhaeuser expands its reach even further.
Tri Pointe will acquire five brands from Weyerhaeuser: Pardee Homes, Trendmaker Homes, Maracay Homes, Winchester Homes and Quadrant Homes. Pardee Homes has operations in southern California, but it also will give Tri Pointe access to the Las Vegas market. Trendmaker Homes has operations in Texas, while Maracay Homes is in Arizona. Winchester Homes provides entry to the Washington, D.C., metro area and Quadrant Homes to the Puget Sound region in Washington.
While the housing market's recovery has been steady, homebuilders have been selective in their consolidation efforts. They've picked their spots wisely, trying to ensure the best fit for their business. In June Ryland Group Inc. purchased the Dallas/Fort Worth operations of LionsGate Homes, expanding its presence in the region. And last month William Lyon Homes _ which went public in May _ said it was bolstering its Colorado presence, acquiring four new home communities there under the Village Homes brand.
Weyerhaeuser's decision to shed its homebuilding operations comes after the company announced a strategic review of the unit in June. Weyerhaeuser President and CEO Doyle Simons said in a statement that the company decided that the combination with Tri Pointe provided the greatest value for its shareholders.
"The combined company will be a strong standalone homebuilder, and the separation of our homebuilding division allows us to focus on driving performance in our forest products businesses to deliver further value to our shareholders," he said.
The deal includes about 130 million Tri Pointe shares valued at $2 billion and a payment of about $700 million in cash to Weyerhaeuser.
Weyerhaeuser will distribute ownership of Weyerhaeuser Real Estate Co. to its shareholders. That business will become a Tri Pointe subsidiary. Weyerhaeuser shareholders will receive approximately 80.5 percent of the combined company, with pre-transaction Tri Pointe shareholders owning the balance.
Certain assets of Weyerhaeuser Real Estate won't be included in the transaction and will be kept by Weyerhaeuser.
Tri Pointe, which will continue to be based in Irvine, Calif., said that it will expand its board from seven to nine members. Weyerhaeuser will choose four directors for appointment, with Tri Pointe selecting five members.
Barry S. Sternlicht, founder of Starwood Hotels & Resorts Worldwide Inc. and head of the Starwood Capital Group investment firm, will continue as chairman of the Tri Pointe board. Doug Bauer will remain Tri Pointe's CEO and Mike Grubbs continues as chief financial officer. Tri Pointe's Tom Mitchell will remain as president and chief operating officer.
Tri Pointe and Weyerhaeuser will continue to run separately until the transaction is complete.
The deal is targeted to close by the end of 2014's second quarter. It still needs approval from Tri Pointe shareholders.
Weyerhaeuser shares added 9 cents to $30.43, while Tri Pointe shares surged $1.12, or 7.3 percent, to $16.50 in afternoon trading.
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