Rayonier Inc. and Pope Resources have entered into a definitive merger agreement under which Rayonier will acquire all of the outstanding limited partnership units of Pope Resources for consideration consisting of equity and cash.
Under the terms of the agreement, Pope Resources unitholders will have the right to elect to receive 3.929 common shares of Rayonier, 3.929 units of Rayonier Operating Partnership LP. Based on Rayonier’s 10-day volume-weighted average price, the transaction values Pope Resources’ limited partnership equity at $554 million, or $126.91 per unit (assuming 70% of the Pope Resources units are exchanged for equity consideration and 30% are exchanged for cash consideration).
Following the closing of the transaction, Rayonier Operating Partnership LP will own all of the assets of Rayonier and Pope Resources and will be the operating partnership of Rayonier’s umbrella partnership real estate investment trust . The units of Rayonier Operating Partnership LP can be converted into cash based on the market price of Rayonier common shares or, at Rayonier’s option, exchanged for Rayonier common shares on a 1:1 basis, following a 60-day notice period.
Pope Resources unitholders that elect to receive Rayonier Operating Partnership LP units will generally defer any capital gain recognition on their Pope Resources units until they exchange those units for cash or Rayonier common shares.
“We are delighted to be combining two premier pure-play timber organizations using an innovative tax-deferred UPREIT structure,” said David Nunes, President and CEO of Rayonier. “Pope Resources has a strong track record as a best-in-class Pacific Northwest timberland operator and possesses an excellent set of assets in high-quality markets. Our two organizations have very compatible cultures, a complementary set of assets and a shared dedication to value maximization through intensive silvicultural practices and higher-and-better-use real estate operations. The addition of these high-quality Pacific Northwest timberlands increases Rayonier’s ownership in the region to 504,000 acres, adds 57 MMBF to our sustainable yield, increases our proportion of Douglas-fir inventory and offers a complementary age-class fit. We look forward to completing this transaction by mid-year, which continues our strategy of adding high-quality timberlands in strong log markets and building long-term value for our shareholders through prudent capital allocation.”
The transaction is expected to close in mid-2020. The transaction requires approval of a majority of the Pope Resources unitholders and is subject to customary closing conditions and regulatory approvals.