More than a week after the Weyerhaeuser Company and Plum Creek Timber announced they would be merging, little has changed at mills in Columbia Falls and Evergreen.
But community members and industry observers are wondering aloud what the multibillion-dollar merger will mean for the mills and their 750 employees in the Flathead Valley. The merger, expected to be finalized sometime next spring, will create one of the largest timber companies in the world that will hold more than 13 million acres of timberland across the United States.
While nearly everyone in the industry agrees that it’s still too early to determine what might result from the merger, there are some concerns that it could mean layoffs or even mill closures.
“It’s about the bottom line,” said Todd Morgan, director of forestry industry research at the University of Montana’s Bureau of Business and Economic Research. “As a bigger company there will be a big focus on the shareholders and maximizing their returns and their dividends.”
“There are still a lot of questions,” he added, “but this has the potential for major impacts on the industry in Montana and especially in Flathead County.”
On Nov. 8, Weyerhaeuser and Plum Creek officials said the merger would result in more than $100 million in annual savings. Morgan said that means the combined company (which will operate under the Weyerhaeuser name) could look to eliminate redundancies within the ranks, specifically in management and office employees.
However, there are some advantages to being a bigger company, according to Montana State University Extension Forestry Specialist Peter Kolb. He said Plum Creek’s mills make high-quality specialty wood products in the Flathead Valley, including medium-density fiberboard and marine-grade plywood, a special laminated plywood that can withstand fresh and saltwater and is used in boat building. Those items would be good additions to Weyerhaeuser’s portfolio.
“Any company that can provide a diverse line of products is going to have a much stronger position in the global economy. Both Plum Creek and Weyerhaeuser have very diverse mill operations and so they can provide many different products,” Kolb said. “The downside, of course, is that any facility in a large corporation that isn’t providing big profits could get shut down. The old Smurfit-Stone mill in Frenchtown is a great example of that. When it shut down in 2009 it was making a profit but it wasn’t as big of a profit as some of the company’s other mills.”
Morgan said the combined companies might stand a better chance competing against Canadian mills now that the Softwood Lumber Agreement with that country has expired. The tariff agreement went into effect in 2006 to level the economic playing field for U.S. and subsidized Canadian mills, but it expired last month.
But Kolb said it’s unlikely the expiring softwood lumber agreement played a major role in the two companies’ decision to merge. He noted that a merger of this scale couldn’t be organized overnight and that no one in the industry outside of Weyerhaeuser and Plum Creek saw the deal coming.
“This has been one of the best kept secrets ever,” Kolb said. “Everyone in the timber industry was caught off guard by this announcement. These guys should probably work for the CIA or get an award for keeping it this quiet for so long.”
Under the terms of the agreement, Plum Creek shareholders will receive 1.6 shares of Weyerhaeuser for each Plum Creek share held. Following the closing, Weyerhaeuser shareholders would own about 65 percent of the company and Plum Creek shareholders would own 35 percent. Officials say the merger will be completed sometime during the second quarter of 2016.