While not the behemoth it once was, Weyerhaeuser is still a company of some heft — more than $7 billion in revenue in 2012 — and still capable of doing things in a big way.
Such as, on a Sunday night, announcing a new chief executive officer, a $2.65 billion acquisition of timberlands in Washington and Oregon and, oh by the way, we might be selling one of our major divisions.
Each of these announcements is interesting on its own and in combination with the others for what they say about the company, the forest products industry and the business landscape of the Northwest.
So what do they say? Let’s start with the least startling of the news, that CEO Dan Fulton will retire this year, to be succeeded by Doyle Simons, formerly with Temple-Inland. Fulton turns 65 this year, a typical age for retirement of chief executives, and has been CEO since 2008, translating to a little more than five years in the top job.
That’s not an uncommon tenure for a CEO in the corporate world even in normal times, which the past five, for Weyerhaeuser, were decidedly not. The company was already under some stress when the Great Recession, driven by the housing industry’s collapse, hit. That bit Weyerhaeuser three times, from lower demand for logs (at least domestically) from its timberlands to lower volumes of lumber and building-product sales and fewer home starts in its real-estate development subsidiaries.
Weyerhaeuser did a lot more than hunker down and attempt to weather the passing storm, although that would have been an understandable reaction. Under Fulton’s predecessor, Steve Rogel, Weyerhaeuser was big on acquisitions, including his former employer Willamette Industries and MacMillan-Bloedel, but then reversed direction and began shedding pieces. Fine papers went to Domtar in 2006, and containerboard packaging and recycling to International Paper in 2008.
Fulton continued the restructuring, overseeing the conversion to a real-estate investment trust as well as the closing of mills. He also furthered Weyerhaeuser toward developing an energy business, with ventures in biofuels and geothermal to complement existing revenues generated from oil and gas leases on its lands.
If past is prologue, that sort of strategic rebalancing is likely to continue under Simons. He has been on the Weyerhaeuser board for a year, so it’s not as though the company has recruited a complete outsider to take over. Despite its corporate age, Weyerhaeuser has during the past two decades demonstrated a willingness to remake itself, quite dramatically on occasion, which is the sort of things companies need to do if they wish to achieve longevity.
Sometimes that strategic rebalancing means getting back to what you started with, which in Weyerhaeuser’s case means growing trees, and that brings us to Major Development No. 2, the acquisition of timberland.
Between Weyerhaeuser’s international ventures, the closing of pulp, paper and lumber mills in the state, the sale of some timberlands locally (82,000 acres in southwest Washington in 2011), and the actions of other regionally significant companies (a certain airplane manufacturer comes to mind), Washingtonians might be forgiven some nervousness about the company’s long-term commitment to operating here.
Buying 645,000 acres of timber in Washington and Oregon, increasing Weyerhaeuser’s holdings in the two states by a third, provides at least a hint of reassurance that the company likes being in the basic business of growing, cutting, selling and processing trees, and likes being in that business in the Pacific Northwest. What makes the deal particularly attractive for the company is that the Longview timberlands are in many cases right next door to its own; Weyerhaeuser expects to generate millions of dollars in annual operating savings because of that feature.
But while Weyerhaeuser apparently likes that business, perhaps it isn’t as enamored with another — homebuilding (which, interestingly enough, is the business Fulton rose through to become CEO).
In Major Development No. 3, Weyerhaeuser said it is exploring a “broad range” of alternatives for its real-estate company, including merger, sale or spinoff. “Given the improving fundamentals of the housing market, we believe now is a prudent time to explore strategic alternatives for this business,” a company release said.
The company hasn’t been any more forthcoming about its plans, such as why it might consider exiting that business beyond the usual boilerplate of enhancing shareholder value or even when it might reach a decision. Just making the announcement, though, signals to the world that the sales window is open and, “Hey, if you want it, make us an offer.”
Homebuilding — including local operation Quadrant Homes — was a $1.1 billion business in 2012, so it’s not some minor operation whose absence won’t be noticed. But within the company, the idea that Weyerhaeuser can get a good price for the business, and do something better with the proceeds, is apparently plausible enough that it’s worth seriously studying, and telling everyone that it’s contemplating something dramatic.
That it is doing so is the bigger theme in the Sunday news outbreak in Federal Way. A tree is the very embodiment of slow, long-term growth, certainly not nimble and not prone to dramatic change. A company making a living on trees, however, had better be willing and able to change swiftly and significantly if it wants to endure as long as the underlying asset upon which its business depends.