Exclusive: Tri Pointe in advanced talks to buy Weyerhaeuser home unit - sources

Mon Oct 21, 2013 8:26pm EDT
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By Soyoung Kim

NEW YORK (Reuters) - Tri Pointe Homes Inc (TPH.N: Quote), a homebuilder backed by Barry Sternlicht's Starwood Capital Group LLC, is in advanced talks to buy Weyerhaeuser Co's (WY.N: Quote) homebuilding division for about $2.7 billion, according to people familiar with the matter.

Weyerhaeuser, which announced in June it was reviewing strategic options for the homebuilding and real estate development unit, is trying to finalize a sale to Tri Pointe as soon as in the next two weeks, the people said on Monday.

Under the proposed terms of a deal, the two companies are using a structure known as Reverse Morris Trust - a transaction that allows a parent company to sell its subsidiary in a tax-efficient manner, the people said.

Shares of Tri Pointe surged as much as 12 percent after Reuters reported the talks on Monday, and ended up 5.8 percent at $14.89 on the New York Stock Exchange. Weyerhaeuser shares ended flat at $30.09.

Discussions with Tri Pointe are still continuing, and the outcome may yet change as other homebuilders remain interested in buying the Weyerhaeuser unit, cautioned the people, who asked not to be named because the matter is confidential.

Taylor Morrison Home Corp (TMHC.N: Quote) and Brookfield Residential Properties Inc, the land developer controlled by Brookfield Asset Management (BAMa.TO: Quote), are among the companies that have also been in talks with Weyerhaeuser about buying the division, the people said.

Representatives for Weyerhaeuser, Starwood Capital and Brookfield declined to comment. Tri Pointe and Taylor Morrison did not respond to requests for comment.

The so-called Reverse Morris Trust structure is used when a parent company has a subsidiary that it wants to sell without paying tax. That subsidiary will usually have a bigger market capitalization than the company it wants to merge with, and its shareholders would own more than 50 percent of the combined entity.   Continued...