Weyerhaeuser: Worth More Carved Up?

This lumber company says it is considering selling off part of its business, and investors are hoping to benefit.

The market lacked direction May 4, but that didn't stop Weyerhaeuser (WY) stock from shooting up 5.7% to close at $82.62. It's not the financial performance of the big forest products company that's driving the shares. Weyerhaeuser reported weak earnings, mainly due to the recession in housing. No, investors are betting the lumber company will be carved up and will be worth much more as a sum of its parts than as one tree.

Weyerhaeuser management announced May 4 that it is considering a sale of its containerboard, packaging and recycling unit. The company recently spun off its fine paper business but retains part ownership. And Wall Street is pressuring the company to create a real-estate investment trust from its six million acres of timberland. Forming a REIT would reduce Weyerhaeuser's taxes and presumably offer a more enticing dividend yield to investors.

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Contributing Writer, Kiplinger's Personal Finance

Andrew Tanzer is an editorial consultant and investment writer. After working as a journalist for 25 years at magazines that included Forbes and Kiplinger’s Personal Finance, he served as a senior research analyst and investment writer at a leading New York-based financial advisor. Andrew currently writes for several large hedge and mutual funds, private wealth advisors, and a major bank. He earned a BA in East Asian Studies from Wesleyan University, an MS in Journalism from the Columbia Graduate School of Journalism, and holds both CFA and CFP® designations.