NEW YORK (CNNfn) - Timber giant Weyerhaeuser Co. agreed to acquire joint-venture partner TJ International Tuesday for $720 million in cash.
The acquisition aims to give Weyerhaeuser, one of the world's top forest-products company, complete control of Trus Joist MacMillan, which is the world's leading manufacturer of engineered-lumber products and is currently controlled by TJ International.
Weyerhaeuser, based in Federal Way, Wash., already owns 49 percent of Trus Joist MacMillan, with TJ International controlling the remaining shares. Trus Joist MacMillan products are used primarily for structural framing and industrial applications.
Weyerhaeuser officials said they expect the acquisition to immediately add to earnings and cash flow.
The deal is also expected to generate roughly $50 million in annual savings, primarily through streamlined purchasing and distribution practices. Weyerhaeuser is already TJ International's largest distributor and one of its largest suppliers of raw material.
Steven Rogel, Weyerhaeuser's chairman, president and chief executive officer, said the nation's current economic conditions made the timing right to pursue this acquisition.
"The outlook for housing starts, interest rates and global GDP remains relatively strong and Trus Joist Macmillan's business is closely aligned with ours," Rogel said in a statement.
The deal raised some eyebrows among debt watchers though, as the all-cash acquisition, which values TJ International at $42 per share, will raise Weyerhaeuser's debt slightly to more than $5 billion.
Debt-rating agency Moody's Investors Service noted "this level is high, given our current expectations for cash flow generation through the next cycle."
Moody's ultimately confirmed Weyerhaeuser's debt ratings, but changed the outlook of the ratings to negative.
Weyerhaeuser (WY) shares dropped slightly on the news, falling 3/8 to 60-3/16 in mid-afternoon trading while TJ International (TJCO) shares climbed 9-1/4 to 41-1/2.
-- from staff and wire reports