Plum Creek Timber (NYSE:PCL) will have a lot of new wood on its hands in the near future. The company announced that it has signed a $1.1 billion purchase and sale agreement with MeadWestvaco (NYSE:WRK), giving it possession of what it describes as "501,000 acres of industrial timberlands, associated wind and mineral assets, and an interest in approximately 109,000 acres of high-value rural and development-quality lands."
The deal also gives Plum Creek subsurface rights, mineral rights, and wind power assets associated with the timberlands.
In the press release heralding the news, Plum Creek quoted its CEO, Rick Holley, as saying that the acquisition "adds significant assets to our existing timber resource base and is expected to be cash flow accretive in the first 12 months."
The timber harvest from the properties is expected to average around 3 million tons per year over the next decade, the company said. The mineral and wind assets in the deal are anticipated to generate roughly $6 million in annual cash flow at current commodity prices.
To help finance the acquisition, Plum Creek will float 14.1 million shares of its common stock in an underwritten public offering. It will also grant the underwriters a 30-day option to buy an additional 2.115 million shares. Goldman Sachs and JPMorgan Chase unit J.P. Morgan Securities are the issue's joint book-running managers.
At the moment, Plum Creek has just under 163 million shares outstanding. Its stock most recently closed at $49.63 per share.
Fool contributor Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and owns shares of JPMorgan Chase. 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.