Weyerhaeuser is selling its homebuilding division to Tri Pointe Homes in a $2.7 billion deal that will leave Weyerhaeuser shareholders in control of one of the 10-largest homebuilders in the United States.
Tri Pointe said the deal would give it control of about 27,000 lots in high-growth markets where there are shortages of land ready to build on.
Under terms of the transaction, Weyerhaeuser shareholders will receive about $2 billion in Tri Pointe's stock, based on Tri Pointe's Friday close of $15.38.
(Read more: Home builder confidence stalls in September)
The Weyerhaeuser unit, Weyerhaeuser Real Estate (WRECO), will also pay $700 million in cash to its parent.
Weyerhaeuser shareholders will own 80.5 percent of the combined company after the deal is completed.
Shares of Tri Pointe, which is backed by Barry Sternlicht's Starwood Capital Group, have risen 9 percent since Reuters first reported on Oct. 21 that it was in advanced talks to buy the Weyerhaeuser unit.
(Read more: Is Asia facing a housing debt crisis?)
The unit's biggest brand is Pardee Homes, which builds houses in Southern California and Las Vegas. Its other brands include Trendmaker Homes in Texas and Maracay Homes in Arizona.
Doug Bauer will continue to serve as Tri Pointe's chief executive upon closing of the transaction.
Weyerhaeuser said some assets of WRECO are excluded from the deal, which is expected to close by the end of the second quarter of 2014.
Deutsche Bank Securities is the financial adviser to Tri Pointe and Gibson, Dunn & Crutcher is the legal adviser.
(Read more: Where's the next property bubble building?)