PotlatchDeltic (PCH) To Divest MDF Business For $92 Million
Zacks Investment Research | Dec 23, 2018 09:20PM ET
PotlatchDeltic Corporation (NASDAQ:PCH) is all set to divest El Dorado Medium Density Fiberboard (“MDF”) business to U.S.-based wood products company, Roseburg Forest Products (“Roseburg”).
The deal has a purchase price of approximately $92 million, of which $63 million will be funded in cash and $29 million in revenue bond obligations. The transaction is likely to close in the first quarter of 2019. The MDF business will continue to operate independently till the closing of the transaction.
On Feb 20, 2018, the company’s wholly-owned subsidiary, Portland Merger, LLC merged its entities with Deltic Timber Corporation (“Deltic”) and took possession of this well-positioned MDF business.
Rationale Behind the Divestiture
The company is divesting MDF business in order to boost performance of the Wood Products segment and enhance shareholder value. As it is, in Wood Products segment, the company anticipates average lumber price realization15-20% lower than the third-quarter level along with reduced lumber shipments.
Moreover, the company anticipates overall adjusted EBITDA to be marginally less than half of the third-quarter figure, mainly due to lower harvest volumes and sawlog prices. Consequently, its shares have declined 38.4%, underperforming the Original post
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