October 22, 2017 / 7:55 PM / a month ago

Potlatch nears all-stock acquisition of Deltic Timber: sources

(Reuters) - U.S. forest products company Potlatch Corp (PCH.O) is nearing an all-stock deal to acquire smaller peer Deltic Timber Corp (DEL.N), people familiar with the matter said on Sunday.

The deal could offer Potlatch more scale to cope with price volatility in the lumber market. Even before Hurricanes Harvey and Irma struck this year, U.S. residential construction had almost stagnated because of shortages of land and skilled labor, as well as rising costs of building materials.

Deltic had said in August that it would work with investment bank Goldman Sachs Group Inc (GS.N) and law firm Davis Polk & Wardwell LLP to review its options after activist shareholder Southeastern Asset Management Inc pressured it to explore a sale.

The companies could announce a deal as early as Monday, the sources said, requesting anonymity because the negotiations are confidential.

The Wall Street Journal, which first reported the news, cited sources as saying Potlatch would offer 1.8 of its common shares for each Deltic share.

Shareholders of Potlatch, which is organized as a real estate investment trust, would as a result own about 65 percent of the combined company, with Deltic stockholders holding the rest.

Potlatch and Deltic did not immediately respond to requests for comment.

Potlatch has about 1.4 million acres of timberland in Alabama, Arkansas, Idaho, Minnesota and Mississippi. Its market capitalization is $2.2 billion.

Deltic, which has a $1.1 billion market value and is based in El Dorado, Arkansas, owns about 530,000 acres of timberland, operates two sawmills and a medium-density fiberboard plant, and develops real estate.

Reporting by Greg Roumeliotis in New York; Editing by Lisa Von Ahn

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