Why TRI Pointe Homes Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of TRI Pointe Homes (NYSE: TPH  ) jumped as much as 15.7% today after announcing the acquisition of Weyerhaeuser's (NYSE: WY  ) residential real estate unit.

So what: TRI Pointe Homes will pay $2.7 billion for the company in a transaction that will result in Weyerhaeuser shareholders taking a majority stake in TRI Pointe. In all, Weyerhaeuser shareholders will get 130 million shares of TRI Pointe Homes, taking 08.5% of the company and receive about $700 million in cash.  

Now what: Management said the deal will be accretive, meaning it will add to earnings immediately. There's no doubt this will give the company a larger scale, but only time will tell if that will translate into higher earnings. I don't think this is worth paying up for, and the 5% gain at the end of the day is probably more reasonable given the merger.

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