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Potlatch and Deltic Timber to Combine
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Spokane, Washington, USA and El Dorado, Arkansas, USA 23 October 2017 -- (GLOBE NEWSWIRE) -- Potlatch Corporation(NASDAQ:PCH) ("Potlatch") and Deltic Timber Corporation (NYSE:DEL) ("Deltic") today announced that they have entered into a definitive agreement to combine in an all-stock transaction and create a leading domestic timberland owner and top-tier lumber manufacturer. The combined company will be named PotlatchDeltic Corporation and its shares will trade on the Nasdaq Stock Market under the ticker PCH.

Based on the closing stock prices of Potlatch and Deltic on October 20, 2017, the combined company is expected to have a pro forma equity market capitalization of approximately $3.3 billion and a total enterprise value of more than $4.0 billion, including approximately $700 million in net debt. Following completion of the transaction, the combined company will have more than 1,500 employees serving over 200 customers through operations across its extensive timberland and lumber manufacturing portfolio.

Under the terms of the agreement, which has been unanimously approved by the Boards of Directors of both companies, Deltic stockholders will receive 1.80 common shares of Potlatch stock for each common share of Deltic that they own. Following the close of the transaction, Potlatch stockholders will own approximately 65% of the combined company, and Deltic stockholders will own approximately 35% on a fully diluted basis.

The agreement also provides for Deltic to convert to a REIT structure, effective at the closing date of the transaction, ensuring the combined company achieves the most efficient tax structure. As part of the REIT conversion process, Deltic's accumulated earnings and profits, which are estimated to be approximately $250 million, will be distributed to stockholders of the combined company through a dividend consisting of 80% stock and 20% cash by the end of 2018.

The combination brings together two leading timberland owners and lumber manufacturers. Together, the combined company will have a highly productive and diverse timberland portfolio of approximately 2 million acres, with approximately 1.1 million acres in the U.S. South, 600,000 acres in Idaho, and 150,000 acres in Minnesota. In addition, upon completion of the transaction, the company will operate eight wood products manufacturing facilities, including six lumber manufacturing facilities, one medium density fiberboard ("MDF") facility and one industrial plywood mill. In total, the combined company will have lumber capacity of 1.2 billion board feet, making it one of the leading producers in the U.S. Furthermore, the company's lumber capacity will be heavily weighted towards high-margin southern yellow pine lumber, with over half of the company's capacity being produced at its three southern mills. The transaction also combines two highly complementary and successful real estate businesses.

Mike Covey, Chairman and Chief Executive Officer of Potlatch, said, "With this transaction, we unite two great timber companies uniquely positioned to drive value for our stockholders and benefits for our customers, partners and employees. The complementary businesses make us a natural fit. With Deltic, we gain significant scale particularly through nearly one million acres in Arkansas and substantially expanded sawmill capacity. Together, we can realize significant productivity improvements by sharing best practices across both businesses, implementing optimal silvicultural practices, increasing harvest levels and improving lumber manufacturing volumes. We look forward to completing the transaction and are confident that together we will create a top-tier timber REIT."

Robert C. Nolan, Chairman of Deltic, said, "Earlier this year, the Deltic Board of Directors began a comprehensive assessment of a range of options aimed at maximizing value for Deltic stockholders. The Board is extremely pleased that this process led to our combination with Potlatch, as we believe it offers the best path toward achieving our shared goals. We are confident that the combined company has the capacity to enhance value greatly in excess of what could be achieved by either company independently."

John Enlow, President and Chief Executive Officer of Deltic, said, "This partnership with Potlatch not only maximizes value for our stockholders but also provides them with the opportunity to participate in the significant upside potential of this combination. Furthermore, uniting our high-quality assets, including our deeply talented and dedicated employees, will greatly enhance the potential of PotlatchDeltic. We look forward to working together to ensure a seamless transition and capitalize on the robust opportunities for growth and success."

Potlatch and Deltic: A Stronger Platform for Growth

The combination offers significant strategic and financial opportunities beyond what could be achieved by each company on a standalone basis, notably through:

  • Complementary Acreage and Operations. The combination will result in approximately 933,000 acres in Arkansas and northern Louisiana, as well as sawmill capacity of 630 million board-feet ("MMBF") within Arkansas. Operational synergies are expected to be achieved through expanded harvest volumes as well as increased lumber production. The company will benefit from sharing of best-in-class practices across both companies to optimize silviculture, logistics and lumber manufacturing productivity, as well as the ability to achieve operational efficiencies through integrating systems and resources. Further, the combined company will be the timber REIT with the most exposure to strengthening lumber markets and to continued improvement in U.S. housing.
  • Compelling Synergy Opportunities. The combined company expects to realize approximately $50 millionafter-tax cash synergies and operational efficiencies, driven by a combination of corporate and operational synergies. Increasing lumber production and harvest volumes comprise slightly over half of the estimated $50 million in synergies, while overhead cost savings and conversion to tax-efficient REIT status make up the remainder. Potlatch and Deltic expect run rate synergies to be achieved by the end of the second year, with additional opportunities over the longer term.
  • Robust Financial Profile. The transaction will create enhanced scale to drive future growth, with combined market capitalization of over $3 billion and enterprise value of over $4 billion. Cash available for distribution ("CAD") per share will be accretive in the first full year post-close and 5% CAD accretive in year two. The combined company is committed to achieving an investment grade credit rating.
  • Stronger Stockholder Returns. Both companies intend to maintain dividend payments through completion of the transaction and in a separate news release Potlatch has announced an increase of its annual dividend from $1.50 per share to $1.60 per share, beginning in the fourth quarter of 2017.

Leadership, Board Composition and Headquarters

The leadership team will comprise top talent from both companies. Upon closing of the transaction, Mike Covey will continue to serve as Chairman and CEO, and Eric Cremers will continue to serve as President and COO. John Enlow, currently President and CEO of Deltic, will serve as the company's Vice Chairman and will lead the integration of the two businesses.

The Board of Directors of the combined company will comprise eight Directors from Potlatch and four Directors from Deltic.

The corporate headquarters will be maintained in Spokane, Washington, with the southern operational headquarters located in El Dorado, Arkansas.

Timing and Approvals

The transaction is expected to close in the first half of 2018. The transaction requires the approval of stockholders of both Potlatch and Deltic and is subject to the satisfaction of customary closing conditions and regulatory approvals.

About Potlatch

Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.4 million acres of timberland in Alabama, Arkansas, Idaho, Minnesota and Mississippi. Potlatch, a certified forest practices leader, is committed to providing superior returns to stockholders through long-term stewardship of its forest resources. The company also conducts a land sales and development business and operates wood products manufacturing facilities through its taxable REIT subsidiary. More information about Potlatch can be found on the company's website at www.potlatchcorp.com.

About Deltic

Deltic Timber Corporation is a natural resources company focused on the efficient and environmentally responsible management of its land holdings. The Company owns approximately 530,000 acres of timberland, operates two sawmills and a medium density fiber-board plant, and is engaged in real estate development. Headquartered in El Dorado, Arkansas, the Company's operations are located primarily in Arkansas and north Louisiana.



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