Core Viewpoint - Rayonier announced the acquisition of PotlatchDeltic in an all-stock deal, valuing the combined company at $7.1 billion, or $8.2 billion including debt, creating one of the largest lumber companies in the US [1] Industry Overview - The timber industry is facing significant challenges in 2025, with fluctuating prices due to tariffs and trade war uncertainties, alongside crashing demand from a stagnant housing market [2] - Lumber futures dropped 24% from a three-year high in August to a seven-month low in September, with the US Lumber Coalition describing the current market conditions as the worst ever [3] Tariffs Impact - A new round of tariffs on imported lumber and wood products is expected to significantly impact Canada's lumber industry, with softwood lumber facing an effective tariff rate of 45% [3] - The protectionist measures could potentially benefit Rayonier and PotlatchDeltic, both operating as REITs, by bolstering their market position [3] Strategic Advantages - The merger will result in the combined ownership of 4.2 million acres of timberland across 11 states, along with seven wood product manufacturing sites and six lumber mills, positioning the new entity as the second-largest timberland owner in the US [6] - Both companies have also leased land to solar farm developers, with these deals projected to be ten times more profitable than traditional timber operations [4]

Trade Dispute - US and Canada have been in a softwood lumber dispute since the 1980s [1] - The US imports about 25% of its softwood lumber from Canada [2] - The Commerce Department is expected to increase tariffs on Canadian softwood lumber from 144% to 345% [3] Market Impact - US builders claim restrictions on Canadian imports increase home construction costs, even though lumber accounts for less than 20% of those costs [3] - Increased tariffs could negatively impact Canada's lumber industry and benefit US producers [4] - Replacing Canadian wood in the short term could increase housing costs [4] Potential Resolution - Canada may consider capping lumber exports to the US [4] - The US aims to increase domestic lumber production by streamlining permits and reducing bureaucracy [4]

Lumber Market Volatility - Lumber prices are volatile, causing uncertainty for construction businesses [1] - In April 2025, softwood lumber prices were 23% higher than the previous year [2] - Lumber futures surged in the first quarter of 2025 due to fears of higher duties and sawmill closures in North America [2] Impact on Homebuilders - Rising lumber prices have impacted major US homebuilders like LAR, Dr Horton, and Toll Brothers, leading to stock declines [2] Trade and Supply - Canada accounts for approximately 85% of all US softwood lumber imports, representing almost a quarter of US supply [3] - Lumber is on the radar of the Trump administration regarding tariffs [3]