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Brookfield to sell assets to Weyerhaeuser, KapStone for $3.68 billion

(Reuters) - Brookfield Asset Management Inc said it will sell its Longview Timber holdings in the U.S. Pacific Northwest to Weyerhaeuser Co for $2.65 billion, including assumption of debt, and will sell a nearby paper and packaging business to KapStone Paper and Packaging Corp for $1.025 billion.

Brookfield's Longview Fibre Paper and Packaging operations include a large paper mill in Longview, Washington and seven container plants in the region that produce Kraft paper, container board and corrugated boxes. Brookfield said it expects net proceeds from that transaction of about $250 million, after repaying debt and distributions to other investors.

"While the timing of the (separate) sale transactions is coincidental, for investors in our funds these transactions represent monetization at excellent returns and puts each of these assets into the hands of strategic buyers who will be able to take them to the next level," Cyrus Madon, Senior Managing Partner in Brookfield's Private Equity Group, said in a release on Sunday.

The Longview Timber parcel includes 645,000 acres in California and Washington that are contiguous with existing timberlands owned by Weyerhaeuser, which is based in Federal Way, Washington.

"This transaction will expand Weyerhaeuser's timber holdings in the Pacific Northwest by 33 percent to approximately 2.6 million acres and increase the total amount of U.S. timberlands it owns or controls to approximately 6.6 million acres," Weyerhaeuser said.

It said the timber acquisition should immediately boost company earnings, and that Weyerhaeuser intends to boost its quarterly dividend to 22 cents per share, from 20 cents per share, beginning with the third-quarter dividend that is payable in September.

Weyerhaeuser, in separate releases on Sunday, said its board had elected Doyle Simons president and chief executive officer, effective August 1, to replace soon-retiring Chief Executive Dan Fulton, and said its board had authorized the exploration of strategic alternatives for its WRECO homebuilding and real estate development business.

Weyerhaeuser also said it is considering a broad range of options for WRECO, including whether to continue to hold it, or a merger, sale or spin-off. It said the business is one of the 20 largest homebuilders in the United States, and that the "improving fundamentals" of the housing market make it a prudent time to explore strategic alternatives for the business.

Weyerhaeuser shares have risen 1.6 percent so far this year, far short of double-digit gains for the broad stock market. But the company's first-quarter net profit more than tripled, helped by a strong recovery in demand from the U.S. housing market. Company revenue rose 31 percent to $1.95 billion.

However, the company forecast slightly lower average selling prices for lumber and oriented-strand board for the second quarter. It also expects higher raw material costs.

Brookfield owns the Longview Timber parcel along with Brookfield Infrastructure Partners , a limited partnership that it partly owns, as well as with private institutional investors.

Brookfield said it expects to have cash proceeds of $600 million from the Longview Timber sale, after repayment of debt and distributions to private investors, while Brookfield Infrastructure would have net cash proceeds of about $470 million.

Weyerhaeuser said Simons, 49, a former chief executive of the Temple-Inland corrugated packaging business before its acquisition by International Paper, would be active as CEO Elect immediately. The company said Fulton will serve as executive vice chairman of Weyerhaeuser's board until his retirement in October.

(Reporting by Ransdell Pierson; Editing by Theodore d'Afflisio)

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