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Rubicon deal to sell Clearwood stake within independent adviser's valuation

Thursday 14th December 2017

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Rubicon's proposal to sell a 45 percent stake in local Clearwood manufacturing business falls within the independent adviser's valuation range. 

The forestry biotech's shareholders will vote on the transaction at a special meeting in Christchurch on Jan. 12 on whether to approve the sale of its interest in Tenon Clearwood Ltd Partnership for US$14.2 million, which is the cost of its investment in the company in April, plus its share of the reduction in the company's net debt since then. That is estimated to be worth a combined US$15.3 million. The buyers include affiliates of Rubicon's two biggest shareholders, Knott Partners and Libra Fund LP. 

Rubicon's independent directors have recommended investors take the deal, with Steve Kasnet saying the deal fell within Grant Samuel's independent valuation range of the stake, the exit would provide funds to make two looming payments on its ArborGen business, and simplify the company's structure providing the opportunity to cut costs. 

"We believe that these three factors – the removal of any overhang in the stock price relating to uncertainty as to the funding source of the deferred ArborGen acquisition and subordinated debt payments, simplifying Rubicon to be a pure-play on the ArborGen business, and the achievement of cost savings, will all be beneficial to building positive momentum in the RBC share price," Kasnet said in a letter to shareholders. "The sale will then make Rubicon a ‘pure-play’ for investors on the ArborGen business upside, and with Rubicon’s financials moving forward then only being ArborGen-based, investors will have greater transparency of ArborGen’s financial results."

Grant Samuel valued Clearwood at between US$51.3 million and US$61.5 million, with Rubicon's stake worth between US$13.6 million and US$18.2 million. 

"In Grant Samuel’s opinion, based on the analysis of the merits outlined above, the terms of the proposed transaction are fair and reasonable to the shareholders of Rubicon not associated with Knott and Libra," the report said. 

If the deal doesn't go ahead, Grant Samuel anticipates Clearwood will need more capital to reduce its level of debt. 

Grant Samuel has valued the business twice in the past 12 months in relation to the sale of former NZX-listed Tenon's business sales. The most recent of those was earlier this year, ending an 18-month process run by an investment bank. 

Kasnet said because the offer was the same price as the earlier transaction, the independent directors chose not to run another sales process as there was no benefit to shareholders. 

Rubicon shares were unchanged at 19.5 cents, and have dropped 11 percent so far this year


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