- Values Pope Resources limited partnership equity at $554
million, or $126.91 per unit
- Adds fee ownership of 125,000 acres(1) of high-quality,
predominantly Douglas-fir timberlands to Rayonier’s Pacific
Northwest timberland portfolio; increases sustainable yield by 57
MMBF (or 455,000 tons) annually and proportion of Douglas-fir
merchantable inventory from 60% to 68%
- Adds private equity timber fund business with three funds
comprising 141,000 acres and assets under management of $545
million; Pope Resources co-investment of 12% represents
“look-through” ownership of additional 17,000 acres
- Augments higher-and-better-use real estate pipeline with rural
and conservation land sale opportunities and high-potential
improved development projects in west Puget Sound area
- Results in targeted annual cost synergies of $5 million,
consisting primarily of rationalization of corporate overhead
- Expected to generate accretion to cash available for
distribution (“CAD”)(2)(3)(4) per share in first full year
- Employs innovative UPREIT structure to defer capital gain
recognition for Pope Resources unitholders
Rayonier Inc. (“Rayonier”) (NYSE:RYN) and Pope Resources, A
Delaware Limited Partnership (“Pope Resources”) (NASDAQ:POPE)
announced today that they have entered into a definitive merger
agreement under which Rayonier will acquire all of the outstanding
limited partnership units of Pope Resources for consideration
consisting of equity and cash. Under the terms of the agreement,
which has been unanimously approved by the boards of directors of
both companies as well as the special committee of Pope Resources’
board composed solely of independent directors, Pope Resources
unitholders will have the right to elect to receive (i) 3.929
common shares of Rayonier, (ii) 3.929 units of Rayonier Operating
Partnership LP, or (iii) $125 in cash in exchange for each unit of
Pope Resources, subject to a proration mechanism as described
below. Based on Rayonier’s 10-day volume-weighted average price,
the transaction values Pope Resources’ limited partnership equity
at $554 million, or $126.91 per unit (assuming 70% of the Pope
Resources units are exchanged for equity consideration and 30% are
exchanged for cash consideration).
Following the closing of the transaction, Rayonier Operating
Partnership LP (n/k/a Rayonier Operating Company LLC) will own all
of the assets of Rayonier and Pope Resources and will be the
operating partnership of Rayonier’s umbrella partnership real
estate investment trust (“UPREIT”). The units of Rayonier Operating
Partnership LP can be converted into cash based on the market price
of Rayonier common shares or, at Rayonier’s option, exchanged for
Rayonier common shares on a 1:1 basis, following a 60-day notice
period. Pope Resources unitholders that elect to receive Rayonier
Operating Partnership LP units will generally defer any capital
gain recognition on their Pope Resources units until they exchange
those units for cash or Rayonier common shares.
“We are delighted to be combining two premier pure-play timber
organizations using an innovative tax-deferred UPREIT structure,”
said David Nunes, President and CEO of Rayonier. “Pope Resources
has a strong track record as a best-in-class Pacific Northwest
timberland operator and possesses an excellent set of assets in
high-quality markets. Our two organizations have very compatible
cultures, a complementary set of assets and a shared dedication to
value maximization through intensive silvicultural practices and
higher-and-better-use real estate operations. The addition of these
high-quality Pacific Northwest timberlands increases Rayonier’s
ownership in the region to 504,000 acres, adds 57 MMBF to our
sustainable yield, increases our proportion of Douglas-fir
inventory and offers a complementary age-class fit. We look forward
to completing this transaction by mid-year, which continues our
strategy of adding high-quality timberlands in strong log markets
and building long-term value for our shareholders through prudent
capital allocation.”
“This transaction is the culmination of a thorough process
undertaken by Pope Resources’ board to maximize value for our
unitholders,” said Tom Ringo, President and CEO of Pope Resources.
“Rayonier is the leading pure-play timberland REIT, with a
well-diversified portfolio of timberlands and an established track
record of creating long-term value from its assets. This
transaction will provide our unitholders with the opportunity to
defer capital gain recognition and participate in Rayonier’s
long-term upside potential, benefitting from a well-managed and
diversified timberland portfolio while still enjoying a strong
dividend yield. Like Pope Resources, Rayonier has a rich heritage
of sustainably managing timberlands, and we look forward to working
closely with them to realize the benefits of this combination on
behalf of our unitholders.”
Transaction Highlights
- Complementary Timberland Portfolios. The combination
will allow Rayonier to meaningfully enhance the scale, diversity
and cash flow potential of its Pacific Northwest timberland
portfolio, while allowing Pope Resources unitholders to participate
in the long-term upside of a more diverse timberland and real
estate portfolio. The addition of Pope Resources’ 125,000 acres(1)
will increase Rayonier’s Pacific Northwest sustainable yield by 32%
and will increase its proportion of Douglas-fir merchantable
inventory from 60% to 68%. The combined organization will benefit
from sharing best-in-class silvicultural practices and optimizing
log merchandising and logistics, and further expects to realize
operational efficiencies and cost savings from integrating systems
and personnel.
- High-Value HBU and Real Estate Development Projects.
Pope Resources’ land portfolio includes several high-potential HBU
and real estate development opportunities, including projects in
Gig Harbor, Port Gamble, Kingston and Bainbridge Island in the west
Puget Sound area. These projects, as well as significant
conservation and rural land sale opportunities within the Pope
Resources portfolio, will significantly enhance Rayonier’s pipeline
of value-added HBU opportunities.
- Attractive Private Equity Timber Fund Business. Pope
Resources operates a private equity timber fund business with three
funds and total assets under management of $545 million, consisting
of 141,000 acres of timberland located in the Pacific Northwest.
The timber fund business has historically provided Pope Resources
with enhanced operational scale, access to institutional capital
for growth and incremental cash flow from asset management fees.
Based on its weighted average co-investment of 12%, Pope Resources’
proportionate ownership in these funds represents an additional
17,000 acres with a pro-rata appraised value of $65 million (or $59
million, net of fund debt).
- Accretive to Cash Flow. Rayonier expects that the
transaction will increase annual Adjusted EBITDA(3)(4)(5) and
CAD(2)(3)(4) by approximately $38 million and $25 million,
respectively, over the next five years. These anticipated increases
are driven, in part, by estimated annual cost synergies of
approximately $5 million, reflecting a reduction of overhead costs
and the elimination of redundant public company costs.
- Prudent Capital Structure. By limiting cash
consideration to approximately 30% of the total limited partnership
units of Pope Resources, Rayonier will be able to maintain
conservative credit metrics consistent with its long-term targets.
Rayonier remains committed to maintaining its investment grade
credit rating.
Transaction Details
Proration Mechanism: Pursuant to the terms of the
agreement, elections will be subject to proration to ensure that
the aggregate amount of cash, on the one hand, and Rayonier common
stock and Rayonier operating partnership units, on the other hand,
that are issued in the merger would be equal to the amounts issued
as if every Pope Resources unit received 2.751 Rayonier common
shares or Rayonier operating partnership units and $37.50 in cash.
If elections for the Rayonier common shares and Rayonier operating
partnership units are oversubscribed, then to reduce the effect of
such proration Rayonier may, in its discretion, add additional
equity (and decrease the amount of cash) payable to the Pope
Resources unitholders making such elections.
GP Consideration: The merger agreement also provides for
Rayonier to acquire the general partner entities of Pope Resources,
Pope MGP, Inc. and Pope EGP, Inc., for consideration consisting of
$10 million of cash (exclusive of the Pope Resources units owned by
these entities).
Valuation: Inclusive of the general partner consideration
described above, the transaction values Pope Resources’ total
equity at $564 million and its enterprise value at $656 million
(excluding fund net debt).
Transaction Support: The general partners of Pope
Resources have approved the transaction, and certain affiliated
unitholders holding approximately 16% of the outstanding limited
partnership units have entered into voting agreements to vote in
favor of the merger.
Timing and Approvals
The transaction is expected to close in mid-2020. The
transaction requires approval of a majority of the Pope Resources
unitholders and is subject to customary closing conditions and
regulatory approvals.
Advisors
Credit Suisse is serving as financial advisor and Wachtell,
Lipton, Rosen & Katz is serving as legal counsel to Rayonier.
Centerview Partners is serving as financial advisor and Munger,
Tolles & Olson LLP is serving as legal advisor to the special
committee of Pope Resources’ board. Davis Wright Tremaine LLP is
serving as legal counsel to Pope Resources.
Conference Call Information
Rayonier will host a conference call and live webcast on
Wednesday, January 15 at 8:30 a.m. Eastern Time / 5:30 a.m. Pacific
Time to discuss the transaction. Access to the live webcast and
presentation will be available at www.rayonier.com. Investors may
listen to the conference call by dialing 800-369-1184 (domestic) or
415-228-3898 (international), passcode: Rayonier. A replay of the
conference call will be available one hour following the call until
Friday, February 14, 2020 by dialing 866-451-8971 (domestic) or
203-369-1204 (international), passcode: 11520.
- Includes approximately 6,000 acres representing long-term
timber deeds, timber reservations from prior land sales, and lands
located within real estate project areas.
- Cash Available for Distribution (CAD) is defined as cash
provided by operating activities adjusted for capital spending
(excluding timberland acquisitions and real estate development
investments) and working capital and other balance sheet changes.
CAD is a non-GAAP measure that management uses to measure cash
generated during a period that is available for common stock
dividends, distributions to the New Zealand minority shareholder,
repurchase of the Company's common shares, debt reduction,
strategic acquisitions and real estate development investments. CAD
is not necessarily indicative of the CAD that may be generated in
future periods.
- Rayonier has presented forward-looking statements regarding
Adjusted EBITDA and Cash Available for Distribution (CAD). These
non-GAAP financial measures are derived by excluding certain
amounts, expenses or income from the corresponding financial
measures determined in accordance with GAAP. The determination of
the amounts that are excluded from these non-GAAP financial
measures is a matter of management judgment and depends upon, among
other factors, the nature of the underlying expense or income
amounts recognized in a given period. We are unable to present a
quantitative reconciliation of forward-looking Adjusted EBITDA and
CAD to their most directly comparable forward-looking GAAP
financial measures because such information is not available, and
management cannot reliably predict all of the necessary components
of such GAAP measures without unreasonable effort or expense. In
addition, we believe such reconciliations would imply a degree of
precision that would be confusing or misleading to investors. These
non-GAAP financial measures are preliminary estimates and are
subject to risks and uncertainties, including, among others,
changes in connection with quarter-end and year-end adjustments.
Any variation between the company’s actual results and
forward-looking financial data set forth above may be
material.
- Excludes transaction expenses and costs to achieve
synergies.
- Adjusted EBITDA is defined as earnings before interest, taxes,
depreciation, depletion, amortization, the non-cash cost of land
and improved development, non-operating income and expense and
Large Dispositions. Adjusted EBITDA is a non-GAAP measure that
management uses to make strategic decisions about the business and
that investors can use to evaluate the operational performance of
the assets under management. It removes the impact of specific
items that management believes do not directly reflect the core
business operations on an ongoing basis. Adjusted EBITDA for the
expected five-year average annual financial impact is calculated on
a “look-through” basis, which combines the Partnership’s Timber and
its 20%, 5%, and 15% ownership interests in Fund II, Fund III, and
Fund IV, respectively.
About Rayonier
Rayonier is a leading timberland real estate investment trust
with assets located in some of the most productive softwood timber
growing regions in the United States and New Zealand. As of
September 30, 2019, Rayonier owned, leased or managed approximately
2.6 million acres of timberlands located in the U.S. South (1.8
million acres), U.S. Pacific Northwest (379,000 acres) and New
Zealand (414,000 acres). More Information is available at
www.rayonier.com.
About Pope Resources
Pope Resources, a publicly traded limited partnership, and its
subsidiaries Olympic Resource Management and Olympic Property
Group, own and manage 125,000 acres of timberland and
higher-and-better-use properties in Washington. In addition, Pope
Resources co-invests in and consolidates three private equity
timber funds that own 141,000 acres of timberland in Washington,
Oregon, and California. The Partnership and its predecessor
companies have owned and managed timberlands and development
properties for over 165 years. Additional information on the
company can be found at www.poperesources.com.
Cautionary Statement Regarding Forward-Looking
Information
In addition to historical information, this communication
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements, which are based on current
expectations, estimates and projections about the industry and
markets in which Rayonier and Pope Resources operate and beliefs of
and assumptions made by Rayonier’s management and Pope Resources’
management, involve uncertainties that could significantly affect
the financial or operating results of Rayonier, Pope Resources or
the combined company. Words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” “estimates,” “will,”
“should,” “may,” “projects,” “could,” “estimates” or variations of
such words and other similar expressions are intended to identify
such forward-looking statements, which generally are not historical
in nature, but not all forward-looking statements include such
identifying words. Such forward-looking statements include, but are
not limited to, expectations about the likelihood and timing of
closing, projections of earnings, statements of plans for future
operations or expected revenues, statements about the benefits of
the proposed transaction involving Rayonier and Pope Resources,
including future financial and operating results, the combined
company’s plans, objectives, expectations and intentions. All
statements that address operating performance, events or
developments that we expect or anticipate will occur in the future,
including statements relating to (i) benefits of the proposed
transaction to stockholders, employees and other constituents of
the combined company, (ii) synergies and other cost savings as a
result of completion of the proposed transaction, (iii) the
expected timetable for completing the proposed transaction or
integration of the two companies, (iv) general conditions in the
geographic areas where Rayonier or Pope Resources operate, (v)
creating value for stockholders, (vi) changes in timber prices,
(vii) changes in sales or contribution volume of developed
properties and (viii) the availability of capital are each
forward-looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Although we believe the
expectations reflected in any forward-looking statements are based
on reasonable assumptions, we can give no assurance that our
expectations will be attained and therefore, actual outcomes and
results may differ materially from what is expressed or forecasted
in such forward-looking statements. The following important
factors, among others, could cause actual results or events to
differ materially from those expressed in forward-looking
statements that may have been made in this document: risks
associated with achieving expected synergies and other costs
savings; risks associated with the ability to complete the proposed
transaction and the timing of the closing of the proposed
transaction; risks of litigation or threats of litigation that may
increase the cost of completing the transaction or may give rise to
unanticipated costs or other uncertainties regarding the same; the
ability to successfully integrate our operations and employees
following the closing of the proposed transaction; the cyclical and
competitive nature of the industries in which we operate;
fluctuations in demand for, or supply of, our forest products and
real estate offerings; entry of new competitors into our markets;
changes in global economic conditions and world events;
fluctuations in demand for our products in Asia, and especially
China; the uncertainties of potential impacts of climate-related
initiatives; the cost and availability of third party logging and
trucking services; the geographic concentration of a significant
portion of our timberland; our ability to identify, finance and
complete timberland acquisitions; changes in environmental laws and
regulations regarding timber harvesting, delineation of wetlands,
and endangered species, that may restrict or adversely impact our
ability to conduct our business, or increase the cost of doing so;
adverse weather conditions, natural disasters and other
catastrophic events such as hurricanes, wind storms and wildfires,
which can adversely affect our timberlands and the production,
distribution and availability of our products; interest rate and
currency movements; our capacity to incur additional debt; changes
in tariffs, taxes or treaties relating to the import and export of
our products or those of our competitors; changes in key management
and personnel; our ability to meet all necessary legal requirements
to continue to qualify as a real estate investment trust and
changes in tax laws that could adversely affect beneficial tax
treatment; the cyclical nature of the real estate business
generally; a delayed or weak recovery in the housing market; the
lengthy, uncertain and costly process associated with the
ownership, entitlement and development of real estate, especially
in Florida, which also may be affected by changes in law, policy
and political factors beyond our control; unexpected delays in the
entry into or closing of real estate transactions; changes in
environmental laws and regulations that may restrict or adversely
impact our ability to sell or develop properties; the timing of
construction and availability of public infrastructure; and the
availability of financing for real estate development and mortgage
loans; the potential impact of announcement of the proposed
transaction or consummation of the proposed transaction on
relationships, including with employees and customers; the
unfavorable outcome of any legal proceedings that have been or may
be instituted against Rayonier or Pope Resources; the amount of the
costs, fees, expenses and charges related to the proposed
transaction and the actual terms of the financings that may be
obtained in connection with the proposed transaction; those
additional risks and factors discussed in reports filed with the
SEC by Rayonier and Pope Resources from time to time, including
those discussed under the heading “Risk Factors” in their
respective most recently filed reports on Form 10-K and 10-Q.
Except to the extent required by applicable law or regulation, each
of Rayonier and Pope Resources disclaims any duty to update any
forward-looking statements contained in this communication or to
otherwise update any of the above-referenced factors.
Important Additional Information and Where to Find It
In connection with the proposed merger, Rayonier and its
subsidiary, Rayonier Operating Partnership LP, will file with the
Securities and Exchange Commission (the “SEC”) a registration
statement on Form S-4 to register the shares of Rayonier common
stock and units representing partnership interests in Rayonier
Operating Partnership LP to be issued in connection with the
merger. The registration statement will include a proxy
statement/prospectus which will be sent to the stockholders of Pope
Resources seeking their approval of the merger-related proposals.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION
STATEMENT ON FORM S-4 AND THE RELATED PROXY STATEMENT/PROSPECTUS,
AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS AND ANY
OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION
WITH THE PROPOSED MERGER, WHEN THEY BECOME AVAILABLE, BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT RAYONIER, POPE RESOURCES
AND THE PROPOSED TRANSACTION.
Investors and security holders may obtain copies of these
documents free of charge through the website maintained by the SEC
at www.sec.gov or from Rayonier at its website, www.rayonier.com,
or from Pope Resources at its website, www.poperesources.com.
Documents filed with the SEC by Rayonier will be available free of
charge by accessing Rayonier’s website at www.rayonier.com under
the heading Investor Relations, or, alternatively, by directing a
request by telephone or mail to Rayonier at 1 Rayonier Way,
Wildlight, FL 32097, and documents filed with the SEC by Pope
Resources will be available free of charge by accessing Pope
Resources’ website at www.poperesources.com under the heading
Investor Relations or, alternatively, by directing a request by
telephone or mail to Pope Resources at 19950 Seventh Avenue NE,
Suite 200, Poulsbo, WA 98370.
PARTICIPANTS IN THE SOLICITATION
Rayonier and Pope Resources and certain of their respective
directors and executive officers and other members of management
and employees may be deemed to be participants in the solicitation
of proxies from the stockholders of Pope Resources in respect of
the proposed transaction under the rules of the SEC. Information
about Pope Resources’ directors and executive officers is available
in Pope Resources’ Annual Report on Form 10-K and certain of its
Current Reports on Form 8-K. Information about Rayonier’s directors
and executive officers is available in Rayonier’s proxy statement
dated April 1, 2019 for its 2019 Annual Meeting of Stockholders,
and certain of its Current Reports on Form 8-K. Other information
regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security
holdings or otherwise, will be contained in the proxy
statement/prospectus and other relevant materials to be filed with
the SEC regarding the merger when they become available. Investors
should read the proxy statement/prospectus carefully when it
becomes available before making any voting or investment decisions.
You may obtain free copies of these documents from Rayonier or Pope
Resources using the sources indicated above.
NO OFFER OR SOLICITATION
This document shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the U.S.
Securities Act of 1933, as amended.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200115005365/en/
Rayonier Contact Investors / Media Mark McHugh SVP and
CFO (904) 357-9100 Pope Resources Contact Investors / Media
Daemon Repp VP and CFO (360) 697-6626
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