UPDATE 2-Weyerhaeuser sets special dividend; shares jump

* To pay $5.6 bln special dividend; move widely expected

* Expects to pay special dividend Sept. 1

* Share count will more than triple

* Reverse stock split under consideration

* Shares up 6.4 pct in morning trading
(Adds byline, dateline, conference call; updates stock rise)

By Ernest Scheyder

NEW YORK, July 12 (BestGrowthStock) – Forest products maker and
homebuilder Weyerhaeuser Co (WY.N: ) said it would pay a $5.6
billion special dividend as part of its conversion to a real
estate investment trust, sending its shares up 6.4 percent in
morning trading.

For each share held, stockholders will receive $26.47,
based on a calculation using Friday’s closing stock price of
$35.84, the company said on Monday.

About 90 percent of the dividend will be in stock, adding
538 million shares and more than tripling the company’s share
count, using the same metric of Friday’s close, it said.

The payout amount was widely expected, and the company
stressed the final payout will depend on where the stock
settles just before the expected payout on Sept. 1.

Federal Way, Washington-based Weyerhaeuser said last fall
that it would convert to a REIT as part of a plan to cut its
corporate tax liability. Shareholders who receive the special
cash dividend will, in effect, assume most of the company’s tax
burden.

Because the REIT conversion will inflate the company’s
float, the board has considered a reverse stock split, Chief
Financial Officer Patty Bedient said on a conference call.

The company will fold its timberlands properties into the
REIT. Some of those lands sit above valuable oil, natural gas
and mineral deposits.

Under the REIT structure, most profits from any drilling
would go to shareholders, not the company.

Non-core businesses, including homebuilding, wood products
and cellulose fibers, will operate under a “taxable REIT
subsidiary.”

These businesses will continue to operate as they do now,
paying typical corporate taxes, and need not pay out most of
their earnings to shareholders.

“We’re confident our conversion to a REIT will enhance our
competitive position,” Chief Executive Dan Fulton said on the
conference call with investors.

The special dividend includes a regular quarterly dividend
of about $11 million and is payable to shareholders of record
as of July 22.

Shareholders can elect stock or cash for the special
dividend, but the total cash payment is limited to 10 percent
of the total distribution.

The company, which is expected to report second-quarter
earnings later this month, said in April it expected to post a
profit. Fulton said on Monday he expects the housing market, a
key part of Weyerhaeuser’s portfolio, to return to “long-term
housing demand.”

Weyerhaeuser will still trade on New York Stock Exchange
after the REIT conversion and be required to follow Securities
and Exchange Commission rules, just like other publicly traded
companies.

Weyerhaeuser shares rose 6.4 percent to $38.14 in early
trading. The stock has traded between $27.18 and $53.69 in the
past 52 weeks.
(Reporting by Ernest Scheyder in New York and Adveith Nair in
Bangalore; Editing by Roshni Menon and John Wallace)

UPDATE 2-Weyerhaeuser sets special dividend; shares jump