UACES Facebook Potlatch acquisition of Deltic probably won’t boost change timber sale prices near term

Potlatch, Deltic merger probably won’t boost change timber sale prices near term

For the moment, Potlatch Corp.’s merger with Akansas-based Deltic Timber probably won’t budge prices of wood being sold to the combined company by landowners, said Matthew Pelkki, economist for the University of Arkansas System Division of Agriculture.

Oct. 25, 2017

By Mary Hightower
U of A System Division of Agriculture

Fast facts:

  • Potlatch, Deltic Timber combined in all-stock deal
  • Pelkki: Near-term timber sale prices movement not expected

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MONTICELLO, Ark. – For the moment, Potlatch Corp.'s merger with Arkansas-based Deltic Timber probably won’t budge prices of wood being sold to the combined company by landowners, said Matthew Pelkki, economist for the University of Arkansas System Division of Agriculture.

Pelkki is associate director of the Arkansas Forest Resources Center and professor and George H. Clippert Endowed Chair at the University of Arkansas at Monticello.

On Monday, Spokane, Washington, -based Potlatch, and Deltic announced an agreement on an all-stock transaction that would create a combined company called PotlatchDeltic Corp. Deltic, headquartered in El Dorado, Arkansas, owns about 530,000 acres of timberland. The company also has sawmills in Ola and Waldo and a wood fiberboard plant. Its operations are in Arkansas and northern Louisiana. Deltic has real estate developments in Little Rock at Chenal Valley and Chenal Downs and Red Oak Ridge in Hot Springs. 

“In the near term, I don't see major differences in the production of lumber or wood prices to landowners selling timber to either company,” Pelkki said Monday. “Deltic will be converted to a real estate investment trust, or REIT, which offers tax advantages but also limits the vertical integration of processing facilities. 

“REITs are supposed to have the bulk of assets and income – greater than 75 percent -- related to real estate and not manufacturing,” he said. “Thus, the ownership and operation of Deltic's two sawmills could be in question. They may stay in operation as a subsidiary of PotlatchDeltic, or they may be sold and operate under new ownership.”

Pelkki said that with the demand for lumber increasing, “I think that the two Deltic sawmills will continue operation, either under the new PotlatchDeltic name, or they will be acquired and operated independently. 

“Canadian firms have purchased several Arkansas lumber mills and both these mills would be desirable for such acquisition,” he said.

PotlatchDeltic will maintain headquarters at Spokane, with its southern operation headquarters at El Dorado.

For more information on forestry, visit the forest resources center at www.afrc.uamont.edu.

About the Division of Agriculture
The University of Arkansas System Division of Agriculture’s mission is to strengthen agriculture, communities, and families by connecting trusted research to the adoption of best practices. Through the Agricultural Experiment Station and the Cooperative Extension Service, the Division of Agriculture conducts research and extension work within the nation’s historic land grant education system. 

The Division of Agriculture is one of 20 entities within the University of Arkansas System. It has offices in all 75 counties in Arkansas and faculty on five system campuses.  

The University of Arkansas System Division of Agriculture offers all its Extension and Research programs and services without regard to race, color, sex, gender identity, sexual orientation, national origin, religion, age, disability, marital or veteran status, genetic information, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.   

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Media Contact: Mary Hightower
Dir. of Communication Services
U of A Division of Agriculture
Cooperative Extension Service
(501) 671-2126
mhightower@uaex.edu

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