UPDATE 2-Pension funds to buy TimberWest for C$1.03 bln

* Pension funds offer TimberWest unitholders C$6.48/unit

* TimberWest units jump more than 20 pct to C$6.53 on TSX
(Adds details, background, unit price move)

By Euan Rocha and Allan Dowd

TORONTO/VANCOUVER, April 11 (Reuters) – Two Canadian
pension funds reached an agreement on Monday to buy Pacific
Coast timberland owner TimberWest Forest Corp (TWF_u.TO: Quote, Profile, Research) in a
deal valued at C$1.03 billion ($1.07 billion), including debt.

The British Columbia Investment Management Corp and the
Public Sector Pension Investment Board have offered TimberWest
unitholders C$6.48 per unit in cash, a 19.6 percent premium to
Friday’s close of C$5.42 on the Toronto Stock Exchange.

TimberWest sells timber from the nearly 328,000 hectares
(810,000 acres) of forest land it owns on Vancouver Island on
Canada’s Pacific coast, and has logging rights on provincially
owned forests in the region.

The offer comes at a time of renewed interest in Canada’s
forestry sector, which has enjoyed increased sales to Asia
after struggling through the downturn in lumber demand because
of the U.S. housing market collapse.

The British Columbia coastal forest region, where
TimberWest’s properties are located, was also hit hard by the
downturn in the paper market, but timber sellers have recently
seen increased demand for pulp logs.

Timber and real estate, as asset classes, typically act as
a hedge against inflation and provide stable risk-adjusted
returns, attributes that are well matched for the needs of
pension plans, the two funds said in a statement.

TimberWest said its board has endorsed the deal, but the
company’s units jumped more than 20 percent to C$6.53 on Monday
morning, suggesting unitholders expect a higher bid to emerge.

Vancouver-based TimberWest has a 60-day “go-shop” period
during which it can seek a superior proposal.

If TimberWest finds a better deal, a break fee of about
C$18 million would be payable. The two funds do not have a
right to match a superior proposal made during this period.

In the absence of another deal, the transaction is expected
to close by the end of June. It is subject to regulatory
approvals and the support of two-thirds of unitholders.

In a separate release, TimberWest said it will reschedule
its annual meeting from April 26, to a later date that will
coincide with the special meeting to approve the takeover. The
bid was unanimously approved by the company’s independent
directors.

Pension funds, which have large pools of capital and
long-term investment outlooks, have been among the most active
private equity dealmakers in Canada since the 2008 downturn,
with investments in real estate, natural resources and other
areas.

BMO Capital Markets, the investment banking arm of Bank of
Montreal (BMO.TO: Quote, Profile, Research). acted as financial adviser to TimberWest and
the special committee evaluating the funds’ offer. It will also
be managing the go-shop process on behalf of the company.

UBS Securities Canada acted as independent valuator and
financial adviser to the special committee. McCarthy Tetrault
LLP acted as legal counsel to TimberWest.

($1=$0.96 Canadian)
(Additional reporting by Aftab Ahmed in Bangalore; editing by
Rob Wilson)

UPDATE 2-Pension funds to buy TimberWest for C$1.03 bln