Rubicon and investors agree to by Tenon's Clearwood

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Rubicon, the NZX-listed forestry biotech company that controls Tenon has teamed with US and New Zealand investors to agree to buy the wood processing company's remaining asset, the Clearwood manufacturing business, for US$55 million (NZ$76.6m), a deal that would actually free up cash and reduce Rubicon's exposure.

The deal needs sign-off from Tenon shareholders before it can be settled on the target date of April 28. Tenon is tied to the transaction by a US$1.65m termination fee if it halts the sale plus costs for the bidding group of up to US$500,000.

The offer amounts to $2.12 a share net of costs, or $2.39 before costs, within the sale and liquidation range in an assessment by Grant Samuel, they said. It also exceeds the top end of value range if Tenon was to continue with the business.

"Deutsche-Craigs ran an exhaustive sales process for Tenon, generating expressions of interest from eight parties, domestic and international," but the Rubicon-led offer was deemed to be the best by the two independent directors. Tenon's three directors linked to Rubicon weren't involved in evaluating the offer.

"Given an extensive investment bank-led process has been run, Tenon's independent directors have accepted the consortium's offer and signed the sale and purchase agreement as being in the best interests of Tenon shareholders," the company said.

Grant Samuel valued Clearwood, inclusive of costs, under a sale and subsequent liquidation of Tenon, at US$45.8m to US$56.3m, or NZ$1.99 to NZ$2.45 per share.

Net of transaction, wind-up and liquidation costs, total cash to be returned to Tenon shareholders under the sale of Clearwood and the subsequent liquidation of Tenon would be about US$48.8m, made up of a US$43m capital return and a further US$5.8m distribution after liquidation.

Rubicon owns about 60 percent of Tenon and also owns about one-third of American seedling company ArborGen. Tenon shares last traded at $2.38. Rubicon rose 2 per cent to 25 cents.

Hugh Fletcher, chair of Rubicon's independent committee managing the deal, said there were several reasons why Rubicon was involved.

"Firstly, to ensure that Tenon's strategic review is completed successfully, with an appropriate outcome for all shareholders," Fletcher said. "Secondly, we have indirectly managed the Clearwood business for a long time and know it well. We are a comfortable owner, but would rather own our Clearwood investment directly through a private vehicle, than via a public entity."

He said the investment vehicle allowed new investors to come on in future, he said. Rubicon's own cash position would lift by about US$10m as a result of this transaction, because it is effectively a selldown from its holding through Tenon, of about 60 percent, and Rubicon will get its share of the US$43m to be returned.