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Rubicon shareholder cries foul over management, calls for carve up and sell-down

Monday 10th October 2011

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Rubicon shareholder Sandell Asset Management Corp. has lost confidence in the forestry-based biotech company’s managers and is calling for a sale of either itself of its assets.

New York-based Sandell’s chief executive Thomas Sandell says Rubicon is “significantly undervalued” after the failure of the ArborGen Inc. float, and that it needs to pursue new alternatives to maximise shareholder value. He proposes either a full sale of Rubicon or the sale of Rubicon’s controlling stake in Tenon which sells wood mouldings in the U.S.

“Following the failure to launch the ArborGen IPO (initial public float) earlier this year, we have lost faith in the ability, or willingness, of Rubicon’s current management to take the steps we believe are necessary to enhance shareholder value in the near term,” Sandell said in a letter to Rubicon management.

Funds managed by Sandell own about 14.4% of Rubicon, and the fund manager has supported its existing management for more than a decade, it said.

Sandell said both ArborGen and Tenon are “very attractive” investment opportunities on a standalone basis, and underpin the company’s fundamental value at $1.20 a share. A sale could fetch as much as $1.65 per share, he said. That values Rubicon at between $341.7 million and $469.9 million.

The shares were unchanged at 42 cents in trading today, and have slumped 64% this year, valuing the company at $119.6 million by market capitalisation. Subsidiary Tenon fell 3% to 65 cents on the NZX, and has shed 44% this year.

Sandell is also lobbying for Rubicon to add three more directors to its board, each of who would represent the company’s shareholders.

“We believe it is critical for the shareholders to have a voice at the board level, to insure that the board is focused on acting in the shareholders’ best interest,” he said.

In July, Rubicon refinanced bank debt and extended its facility to US$20 million to help fund ArborGen. The tree seedling company, which is co-owned by Rubicon and partners International Paper and MeadWestvaco, was forced to abandon its initial public offering plans in May on fears it would not meet minimum support levels due to liquidity concerns.

At the time, ArborGen planned to raise between US$82 million and US$92 million by selling 5.1 million shares at US$16-to-US$18 apiece, according to a filing to the U.S. Securities and Exchange Commission.

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