UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): June 5, 1998
PLUM CREEK TIMBER COMPANY, L.P.
(Exact name of registrant as specified in its charter)
Delaware 1-10239 91-1443693
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
incorporation or
organization)
999 Third Avenue, Suite 2300
Seattle, Washington 98104-4096
Telephone: (206) 467-3600
Item 5. Other Events
On June 5, 1998, Plum Creek Timber Company, L.P. (the "Company")
announced that the Board of Directors had approved the terms upon which it is
proposed to convert the Company from a publicly traded Master Limited
Partnership into a publicly traded Real Estate Investment Trust ("REIT").
The proposed conversion will require approval by the holders of two-thirds
of the Company's outstanding Limited Partner Units eligible to vote.
Proxies for approval of the conversion will be solicited only by means of a
proxy statement/prospectus, which will be mailed to Unitholders upon the
completion of a customary Securities and Exchange Commission review process.
The public announcement concerning the proposed conversion is attached
as Exhibit 99.1 to this document and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits
99.1 Press Release
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PLUM CREEK TIMBER COMPANY, L.P.
(Registrant)
By: Plum Creek Management Company, L.P.
as General Partner
By: /s/ DIANE M. IRVINE
-----------------------
Diane M. Irvine
Vice President and
Chief Financial Officer
(Duly Authorized Officer)
Date: June 8, 1998
Exhibit Index
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Exhibit Description
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99.1 Press Release
PLUM CREEK TIMBER COMPANY, L.P. ANNOUNCES INTENTION
TO CONVERT TO A REIT STRUCTURE
SEATTLE, WASHINGTON -- June 8, 1998 -- Plum Creek Timber Company, L.P.
(NYSE:PCL) announced today that its Board of Directors has authorized the
Company to seek approval from its Unitholders to convert its structure from a
publicly traded Master Limited Partnership (MLP) into a publicly traded Real
Estate Investment Trust (REIT).
As part of the conversion, the Company's 2.4 million acres of timberland
and related wood products manufacturing assets will be owned, and its ongoing
business activities will be conducted, by the REIT, through an operating
partnership and other operating subsidiaries. The REIT structure itself would
generally allow Plum Creek to maintain the flow-through tax advantages it now
has as an MLP while also providing an investment security which may be
attractive to a broader base of investors - including institutional investors.
"Our Board of Directors and management have examined this conversion
with great care, and determined that converting to a REIT structure is in the
best long-term interests of the Company and its Unitholders," said Rick R.
Holley, President and Chief Executive Officer. "The current MLP structure has
served the Company well since going public in 1989. In particular, for the
five years through the end of 1997, it allowed us to provide returns to our
investors that were superior to the S&P 500 index as well as to returns
provided by all other companies in our industry. As we look ahead, one of our
key strategic objectives is to continue to grow the Company through value-
creating acquisitions. We believe that the REIT structure will enhance our
ability to compete for strategic acquisition opportunities by giving us
greater access to both equity and debt capital. This will lower our overall
cost of capital, which we believe will enhance our future cash flows and
provide for increased value growth."
The transaction would be tax-free to current Plum Creek Unitholders, who
would receive one share in the new REIT for each Unit of Plum Creek currently
held. In addition, income from a REIT is reported on a Form 1099 rather than
a Schedule K-1, simplifying tax filings for investors.
Under the terms of the conversion agreement adopted by the Company and
the General Partner, the interests of the General Partner will be converted
into ownership interests in the REIT and the operating partnership. The
General Partner's total equity interest will equal 27% of the REIT on an "as
converted" basis.
Currently, Plum Creek's partnership agreement specifies that the General
Partner is entitled to 2% of all cash distributions, plus incentive
distributions. The incentive distribution is determined by the amount of cash
distributions paid to Unitholders and can range from 10% to 35% of incremental
cash distributions above certain target levels. Since the Partnership's
inception in 1989, the cash distribution to Unitholders has been increased ten
times and now stands at 185% over the original distribution amount of $0.20
per Unit (adjusted for a 3-for-1 Unit split). Based on the current per Unit
cash distribution to Unitholders of $0.57 per quarter, the General Partner's
incentive distribution is at the highest incremental rate of 35%. The General
Partner currently receives 25.5% of the total annual cash distributions of the
Company (the General Partner received $32.9 million in 1997) and is entitled
to 37% of any future increases in cash distributions.
Under the terms of the conversion agreement, the General Partner would
forego future incentive distributions, which are currently at the top
incremental rate of 35%. In addition, the General Partner would also give up
future rights to additional cash distributions on equity issuances and certain
preferential liquidation rights. The elimination of the existing General
Partner incentive structure, together with the REIT benefits noted above, is
expected to lower the Company's overall cost of capital.
The conversion agreement also provides that the General Partner would
have the right to nominate the majority of the slate of candidates for
election to the board of directors of the REIT so long as the General Partner
continues to own an agreed upon equity interest in the REIT or the operating
partnership.
"The General Partner has recognized that the long-term interests of the
Company and all of its Unitholders would be best served by the change to a
REIT structure," Holley stated. "A special committee of independent
directors, together with outside financial and legal advisors, has structured
this transaction to convert the General Partner interest on terms that are
fair to our Unitholders. The General Partner has been very supportive of our
growth strategy, and I am pleased that they will remain active, involved
investors going forward.
"This transaction will not affect the day-to-day operations of the
Company. The REIT conversion does not mean we are getting into the
traditional real estate business. We remain one of the nation's largest
timberland owners, and our focus on expanding our resource base remains the
foundation of our business strategy. We will maintain our focus on
environmentally responsible resource management, growth through acquisitions,
providing high-quality products to our customers in
value-added market segments, and returning value to our owners," concluded
Holley.
The transaction is conditioned upon approval by the holders of two-thirds
of Plum Creek's outstanding Limited Partnership Units. Such approval
will only be solicited by means of a proxy statement/prospectus, which will be
mailed to Unitholders upon the completion of a customary Securities and
Exchange Commission filing and review process. The Company currently
anticipates completing the conversion transaction by year-end.
Certain statements in this release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, particularly any express or implied statements concerning future
financial condition or operating results. Although the Company believes that
the expectations reflected herein are reasonable, the matters discussed herein
involve risks, uncertainties and other factors which may delay, prevent or
adversely affect the conversion or the REIT's planned activities and
operations, and there can be no assurance that such expectations will prove
correct. All forward-looking statements are expressly qualified by this
cautionary statement.
Plum Creek is one of the largest private timberland owners in the nation
with timberlands and mills located in the Pacific Northwest and Southeast
United States.
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