SFSP Agrees to Sell Timber Business for an Undisclosed Price

Santa Fe Southern Pacific, the diversified railroad company in the throes of a major reorganization, said Monday that it had agreed to sell its Northern California timber business to Sierra Pacific Industries of Arcata, Calif.

Privately held Sierra Pacific will pay an undisclosed sum for the 520,000 acres of timberland owned by Santa Fe Pacific Timber, which was put on the block in June by the parent company. Securities analyst John E. Maack Jr. at S. G. Warburg & Co. estimated Monday, based on current market prices, that the timberland brought between $500 and $600 an acre for a total of $260 million to $312 million.

The sale took place amid what many industry experts have described as a glutted market for timberland. Besides SFSP’s 520,000 acres, an estimated 8 million acres of timber--out of a total of 68.8 million nationwide--is also up for sale, according to the American Forest Council.

But there has been a rebound of sorts in the industry, Maack said. After bottoming out in 1983, lumber prices have nearly doubled and have reached $160 for 1,000 board feet, the analyst added. Still, prices are nearly half of what they were in the late 1970s.

Santa Fe’s timberland is concentrated in three large tracts: 220,000 acres north of Lake Tahoe, 200,000 acres in the Shasta region north of Redding and 100,000 acres between Grass Valley and Lake Tahoe. The tracts belonged to the Southern Pacific Co., which merged with Santa Fe Industries in 1983 to form Santa Fe Southern Pacific Corp.

The firm then intended to merge its two railroads--the Atchison, Topeka and Santa Fe Railway and the Southern Pacific Transportation Co.--but the Interstate Commerce Commission rejected the merger earlier this year on antitrust grounds.

As a result, SFSP has decided to restructure itself, selling off the Southern Pacific along with commercial real estate holdings, pipelines, construction and timberland operations. Bids on the railroad are due within the next week or two.