Forest products maker Weyerhaeuser Co
Investors cheered the news, sending shares of the Federal Way, Washington-based company up $5.49, or 12.9 percent, to $48.00 in premarket trading.
The board of directors has not yet set a date for the conversion, but the earliest and most likely date would be in 2010, Chairman Chuck Wilson said in a statement on Tuesday.
The move to a real estate investment trust, or REIT, will slash Weyerhaeuser's tax burden and give its investors higher returns. The company would still trade on an exchange and would be required to pay out most income to shareholders.
A REIT, in essence, is a type of mutual fund that allows multiple investors to pool resources to control various forms of real estate.
The company has large timberland holdings in North and South America and produces packaging, but its real estate operation is seen by many as its flagship business. The recession, however, drained that segment's profits.
Investors had been clamoring for years to have the company convert into a REIT, saying the move would reflect the current perception of the company: Weyerhaeuser is more a real estate builder and manager than just a timber producer.
In determining the timing of the conversion, the company said it will look at the economic recovery and tax policy changes.
Weyerhaeuser said by the end of the year in which the conversion occurs, a special taxable dividend of undistributed earnings and profits must be made.
As of 2010, those earnings and profits are expected to total just under $6 billion, the company said.
A significant portion of the dividend will be paid in stock, the company said.
(Reporting by Ernest Scheyder; additional reporting by Matt Daily; editing by John Wallace)