Weyerhaeuser Co., the second-largest owner of U.S. timberland, declared a record $5.6 billion special dividend to lock in the company's conversion this year to a real estate investment trust.
The company is making the payout to signal its determination to convert to a REIT this year and address investor concern that its shrinking market valuation could have derailed the process, CEO Daniel Fulton said in an interview. The dividend, limited to 10% cash with the balance in stock, will be paid Sept. 1, the company — based in Federal Way, Wash. — said Monday.
“Market conditions today are not impacting our ability to convert, and we wanted to take away the uncertainty and provide the surety for our shareholders that we will complete the conversion this year,” Mr. Fulton said by phone.
Weyerhaeuser has seen its shares in New York tumble by a third since their peak this year on April 23 as investors reacted to the Greek financial crisis and concern the U.S. may slide back into recession. Some shareholders, including Franklin Mutual Advisers LLC, have pressured the company to become a REIT to reduce taxes on earnings from its more than 6 million acres of timberland.
“We have the intent of converting this year,” Mr. Fulton said.
Weyerhaeuser rose $2.27, or 6.3%, to $38.11 at 9:39 a.m. EDT in New York Stock Exchange composite trading. Earlier, the shares gained as much as 7.9%, the most intraday since Dec. 15. They fell 17% this year through July 9.
Shareholders in April approved a plan to distribute shares as part of the planned conversion. As a REIT, most earnings from the timberland won't be the subject of corporate tax before flowing to investors. Under U.S. law, 110-year-old Weyerhaeuser is required to pay out all undistributed earnings and profit to shareholders to qualify to become a REIT.