Industry Reports

Deutsche Bank Reports Summaries

070806 Deutsche Bank Report - MeadWestvaco Announces Timberland Sale

Deutsche Bank - Equity Research

MeadWestvaco {Ticker: MWV.N, Closing Price: USD 30.98, Target Price: USD 39.00, Recommendation: Hold}.

MeadWestvaco announced the sale to 228K acres of owned and 95K acres of leased timberland in Georgia & Alabama to Wells Timberland REIT for $400MM. What does this imply on a per/acre basis? This depends on the value of the leased land. Typically, we assume about 70% of the value of owned land. In MWV's case, we understand that some of the leases were not very long term in nature, and we think it's better to use a 50% ratio.

Thus, the transaction is the functional equivalent of a sale of 270K acres of owned land. On a per/acre basis, the $400MM transaction value works out to about $1,480/acre. This is slightly shy of the $1,587/acre that Temple-Inland received for its timberland, but still a very strong figure. Last year, International Paper sold its timberland for about $1,250/acre. For MeadWestvaco, this is a nice announcement, but the implications are limited, because the bulk of its remaining land value resides in the high-value land near Charleston, South Carolina.