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Rubicon plans to sell Clearwood stake for $15.3M to focus on ArborGen business

Monday 11th December 2017

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Rubicon, the NZX-listed forestry biotech company, has agreed to sell its remaining holding in its Clearwood manufacturing business for about $15.3 million, to focus on its ArborGen forestry genetics business.

Auckland-based Rubicon will sell its 44.88 percent 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, it said in a statement. The proposed buyers are Dorset Management Corp. and Libra Partners NZ LLC, who will each take 20 percent, with the existing owners of the Clearwood partnership taking the remaining 4.88 percent, it said. Dorset is affiliated with Rubicon's biggest shareholder Knott Partners, which owns 28 percent of the company, while Libra is its second-biggest investor with an 18 percent stake. 

Rubicon has been exiting its peripheral investments to focus on its ArborGen business, which it believes will benefit from the new Labour-led government's policies to support the forestry sector and expand afforestation. ArborGen turned positive on an earnings before interest, tax, depreciation and amortisation basis in the last financial year and is expected to be cash positive from now on as its focus turns to commercialising past investment in research. 

Funds from the sale of its Clearwood stake would be used to make two deferred-settlement payments relating to Rubicon's recent acquisition of 100 percent of ArborGen and to repay its outstanding subordinated notes, which total US$21 million. The sale will also simplify Rubicon's business, reducing overhead costs and increase the attractiveness of its shares, the company said.

"We believe that these three factors – ie the removal of any overhang in the stock price relating to uncertainty as to the funding of our upcoming payments, simplifying Rubicon to be a pure-play on the upside inherent in the ArborGen business, and reduction of overhead cost, will all be beneficial to building positive momentum in the RBC share price moving forward," said Stephen Kasnet, chair of the independent committee which is managing the share sale.

The proposed transaction is subject to shareholder approval which will be sought at a meeting of Rubicon shareholders slated for mid-January, with the deal expected to close on Jan. 31, the company said. 

Advisory firm Grant Samuel will prepare an independent report on the plan, which will be included in the notice of meeting to be sent to Rubicon shareholders later this month.

Grant Samuel prepared an independent adviser's report on the sale of Clearwood by Tenon earlier this year. That put an enterprise value of between US$52 million and US$62.5 million on Clearwood. The consortium bought Clearwood for US$55 million. 

Rubicon shares last traded at 19 cents and have dropped 14 percent this year.


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