U.S. forest products company Potlatch confirmed on Monday the item might buy smaller peer Deltic Timber in an all-stock deal that will will boost its lumber capacity.
The equity value of the offer is usually about $1.16 billion, based on 12.1 million Deltic’s diluted shares outstanding at June 30.
Potlatch’s offer values Deltic at $95.4 per share, representing a premium of about 7 percent.
The combined company will have capacity of 1.2 billion board feet with capacity heavily weighted towards high-margin southern yellow pine lumber.
The combined company is usually anticipated to have a pro-forma market cap of about $3.3 billion along having a total enterprise value of more than $4 billion, including about $700 million in net debt, the companies said.
After the deal, Potlatch shareholders might own about 65 percent of the combined company, which might be named PotlatchDeltic Corp, while Deltic shareholders might own the rest.
Reuters had reported the deal on Sunday. The deal could offer more scale to cope with cost volatility from the market.
Deltic Chief Executive Officer John Enlow might be the combined company’s vice chairman, while Potlatch Chief Executive Officer Mike Covey might continue from the role.
Potlatch increased its annual dividend to $1.60 per share coming from $1.50.
BofA Merrill Lynch was the financial adviser for Potlatch, while Goldman Sachs & Co LLC was advising Deltic.
Deltic’s shares were up 7 percent at $95.39 in premarket trading.