Friday 14 October 2016 10:42 AM
Tenon applies to return $100mn to shareholders if US sale goes ahead
By Sophie Boot
Oct. 14 (BusinessDesk) - Taupo-based wood processor Tenon has applied to the High Court for orders to seek shareholder approval to return $100 million in capital through a share cancellation, as part of Blue Wolf Capital's potential acquisition of its US business.
The US$110 million offer from the New York-based private equity firm is pending shareholder approval at the company's annual meeting on Nov. 18. Full details of the proposed sale and capital return and an independent report from Grant Samuel will be distributed to shareholders early next month.
"Given the change in the scale of Tenon’s ongoing business and our lesser ongoing capital requirements post the sale, the net sale proceeds (after repayment of all Tenon debt) is surplus capital, and the board is seeking to return that to Tenon shareholders," chair Luke Moriarty said.
An initial Grant Samuel valuation put the value of Tenon's North American operations at between US$108 million and US$129.5 million, making the offer from Brooklyn-headquartered Blue Wolf at the low end of the valuation range for an offer which stemmed from a strategic review of the company's fortunes initiated last August.
The company wants to cancel half its shares and pay the New Zealand dollar equivalent of US$2.20 for every share cancelled, equivalent to US$1.10 for every share held before cancellation. This would amount to US$71.3 million, or about NZ$100 million, in capital returned.
If shareholders, the largest of which is forestry bio-tech company Rubicon, vote in favour of the sale to Blue Wolf, that would be completed by Nov. 30 New York time, and the capital return payment would be made in late December, Moriarty said.
Tenon, which reports in New Zealand dollars, flagged the possible capital return in its annual earnings announcement in August. It reported net profit after tax, before a $31 million writedown in the carrying value of assets and $3 million in strategic review costs, at $21 million for the year to June 30.
Earnings before interest, tax, depreciation and amortisation doubled to $26 million before the costs noted above and a further $3 million of restructuring and impairment costs, $2 million of which related to Woolworths Australia closing its home improvements chain.
The shares last traded at $2.52, and have dropped 10 percent this year.