Last week, Weyerhauser (NYSE:WY) and Tri Pointe Homes (NYSE:TPH) announced a deal to merge Tri Pointe with Weyerhauser's building unit. The deal will give Weyerhauser an approximately 80% stake in the newly formed entity and a cool $700 million in cash. The resulting newly formed company will immediately be one of the 10 largest homebuilders in the United States.
Sounds great, right? Well, maybe. In the following video, Fool contributor Jay Jenkins summarizes the deal but also reminds prospective investors of the risks -- particularly Tri Pointe's aggressive growth strategy in the face of still uncertain trends in the macro real estate market. Just look at Wells Fargo's (NYSE:WFC) mortgage unit for evidence.
Fool contributor Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.