TENON

[Balance]

But wait, there's more:

Page 15: However,there is a natural hedge for Clearwood to the extent that there is a strong correlation between New Zealanddollar log prices and movements in the US dollar. Taking that into account, the 1c sensitivity reduces to lessthan US$0.1 million EBITDA impact. The NZ$:Euro sensitivity is approximately US$0.28 million EBITDA forevery 1 cent movement

So putting your post and biker's together, EBITDA impact will be positive US$0.2m on USD and US$0.58m negative on Euro = overall adverse US$0.38m.

On US$11.5m EBITDA, this implies a 3.3% impact - hardly significant in the overall scheme of things!

The US$8m winding up costs certainly has a bigger impact - NZ$11.4m = 35c per share impact!

Well, directors and management better justify how a winding up cost can be so high.

[ari]

Still talking it down......https://www.anzsecurities.co.nz/Dire...spx?id=4355421

[biker]

Tenon signs Sale & Purchase Agreement over Clearwood business
February 14, 2017 - Tenon today announced that it had entered into a sale and purchase agreement over its NZ-based Clearwood manufacturing and global sales operations (Clearwood). The purchaser is Tenon Clearwood LP, which comprises a group of US and NZ private investors, and Rubicon (circa 50%) (the Consortium).
The purchase price is US$55 million payable in cash and is conditional on, amongst other things, shareholders approving the sale at a Special Shareholders’ Meeting to be held on 20 March 2017 (refer attached appendix for key terms).
At the same meeting, Tenon will be proposing that (subject to the sale being approved by shareholders) a (second) pro-rata capital return of US$43 million be made to shareholders on closing. It is also proposed that Tenon will seek de-listing from the NZX Main Board and then for the Company to proceed to undertake a voluntary liquidation and return of all residual surplus funds (currently estimated to be a further US$5.8 million approximately) to shareholders. The capital return will be conducted by way of a court approved process, as was the case with the capital return following the sale of Tenon’s US business operations in December 2016.
The indicative timetable is for transaction closing and payment of the (second) capital return to Tenon shareholders to occur on 28 April, 2017, and for the subsequent liquidation of the Tenon Group to be commenced six months later (once the period for warranty claims under the sale and purchase agreement has expired).
Given Rubicon is a member of the Consortium, the Consortium Offer has been considered and negotiated by a sub-committee of the Tenon Board, comprising only the Tenon Independent Directors (Messrs Eglinton and Walker). The Rubicon Directors on the Tenon Board (Messrs Kasnet, Karaplis, and Moriarty) have had no involvement in the Company’s evaluation, consideration, or negotiation of the Consortium Offer and did not vote on any matter in relation to the Offer.
Deutsche-Craigs ran an exhaustive sales process for Tenon, generating expressions of interest from eight parties, domestic and international. Each was fully assessed and the Sub-Committee is comfortable that the Consortium Offer provides the best price, terms and certainty of completion that could have been negotiated with any of those parties.
CONTINUES

[biker]

In assessing these offers, the Sub-Committee took into account an estimated US$6 million (net of cash) in transaction, wind-up and liquidation costs1. Approximately half of these costs have been or will be incurred, regardless of whether this sale proceeds, as they relate to the final Blue Wolf transaction closing or to the ‘right-sizing’ of Tenon under a continuing business scenario, with a management structure appropriate for a smaller, Clearwood-only, Tenon business (a process already underway with the elimination of the Asia-Pacific President and Group CFO roles).
Grant Samuel has been appointed by the Sub-Committee as Independent Advisor to Tenon shareholders (other than Rubicon) on the transaction. Inclusive of costs1, they have valued Clearwood (under a sale and subsequent liquidation of Tenon), at US$45.8 – US$56.3 million, or NZ$1.99 - NZ$2.45 per share.
Assuming the above US$6 million estimated costs and no material Tenon bank debt to be repaid, the total cash to be returned to Tenon shareholders under the sale of Clearwood and the subsequent liquidation of the Tenon Group, will be approximately US$48.8 million, comprising US$43 million by way of (second) capital return, with an additional (estimated) US$5.8 million in a subsequent distribution once Tenon is liquidated.
Grant Samuel was also asked to value Tenon on a continuing basis, assuming no sale of Clearwood. Under that scenario, they assumed that Tenon would re-leverage the Company and make an immediate US$15 million pro-rata capital return to shareholders and determined that the value on a continuing business basis in a range of NZ$1.74 – NZ$2.08 per share. This valuation includes a 15% trading discount for the relative illiquidity of Tenon shares, on-going corporate costs to continue the public entity, as well as US$3 million of one-off costs to right-size the continuing Tenon business
On 23 December 2016, Tenon announced that it had entered into exclusive negotiations with one party with the intent of concluding a sale and purchase agreement over the Clearwood business. The volume weighted average share price for the 4-month period prior to that announcement was NZ$2.02 per share, and the share price on the day immediately prior to that announcement was NZ$2.12. Given the Consortium Offer, which equates to NZ$2.12 net of costs (NZ$2.39 per share before costs) is within Grant Samuel’s recommended sale and liquidation range and exceeds the top end of the value range for a continuing Tenon business and also 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.
Tenon said that all documentation (which would include a Notice of Meeting with full explanatory notes and a detailed transaction and shareholder timeline, and a Grant Samuel Report) would be distributed to shareholders in early March.
CONTINUES

[biker]

1. Business being disposed of
Tenon’s NZ-based Clearwood manufacturing and related global distribution operations, comprising the net assets (including working capital) of Tenon Manufacturing Limited and the shares in Taupo Wood Solutions LLC, in a debt free transaction.
2. Consideration
US$55 million payable in cash. A future cash payment or receipt may occur if net working capital on closing diverges from US$11 million by more than a US$250,000 band, in which case the adjustment will be the amount outside the band.
3. Key conditions
The sale is subject to the satisfaction or waiver of certain conditions, including –
 The passing of Tenon shareholder resolutions approving the transaction
 Staff and contract transfers
 No material adverse change occurring in the Clearwood business prior to settlement
The conditions must be satisfied by 3 April 2017 (other than the material adverse change condition which runs to settlement).
If the conditions are satisfied, settlement is set down for 28 April 2017.
4. Potential termination events
In addition to the conditions, the Consortium can also terminate the transaction if –
 The Tenon Board withdraws its recommendation
 Tenon breaches its obligations in relation to non-solicitation of alternative transactions  There is extensive damage to the Taupo plant after signing.
Tenon can also terminate the transaction if it is entering into an unsolicited alternative transaction as a result of the Tenon Board determining that it is required to do so in order to comply with its fiduciary duties.
Tenon must pay a termination fee of US$1.65 million if –
 It terminates the Sale and Purchase Agreement in order to enter into an alternative
transaction, or
 The Consortium terminates the Sale and Purchase Agreement because the Tenon Board
has withdrawn its recommendation of the sale
Tenon must reimburse the Consortium’s costs and expenses in the amount of US$500,000 if Tenon shareholders vote against the sale.
5. Representations and warranties
The Sale and Purchase Agreement contains a typical set of representations and warranties concerning Clearwood. Any and all claims must be brought within six months of closing. Other than for breaches of fundamental representations (e.g. title to assets), all claims under the Sale and Purchase Agreement are capped at an aggregate US$1 million.
ENDS.

[winner69]

I thought punters were talking $100m?

[drcjp]

Scamtastic.........

[Snow Leopard]

So do I understand correctly that those Tenon shares are going to yield about NZ$2.10 each total up to and including liquidation ?

Best Wishes
Paper Tiger

[Felix]

Assuming the party offers within the range identified in the valuation report, here are my calculations for what it means for capital return -

Valuation report suggested a valuation of US$63.3-$74.7m for the NZ operations. Tenon's 23 December announcement talks about adverse currency movements impacting valuation so let's conservatively take 10% off the valuation, bringing it down to US$57.0-$67.2m.

Tenon talks about US$8m wind up costs. Subtracting this from the revised valuation brings us to US$49.0m-$59.2m. The current USD exchange rate is US69c but again let's be conservative and convert to NZD at 71c. This gives us NZ$69.0m-$83.4m. There are now 32.4m Tenon shares on issue so dividing the NZD amount by total shares gives us a potential capital return of $2.12-$2.57 per share to Tenon shareholders.

We know Tenon's offer for the US operations was at the bottom of the valuation range and the buyer of the NZ operations has the advantage of knowing the valuation range, so I suspect the buyer will also offer at the bottom of the range. This suggests that the current share price of $2.30 is probably fully valued.

Wow so the $2.12 net of costs comes in at the bottom end of my estimated range. It's a pretty rubbish outcome for long standing shareholders who stuck with the company over many hard years and were finally starting to see some reward through growing profits and dividends.

[Xerof]

Have a read of the announcement posted after Friday close.

https://www.nzx.com/companies/TEN/announcements/295257

They re-iterate the theoretical ex-price, after all the changes made, of $2.05 vs $2.50 current market price.

Seems to me they are concerned buyers are getting ahead of themselves.

They are perhaps implying the Clearwood negotiation is for less than expectations, but they are explicit about the costs to wind-up, and as yet unrealised currency losses

But feel free to come to your own conclusions

Well you can't say they didn't warn shareholders. They announced twice.

Even worse, it's deckchairs on the Titanic really - seems to me everyone was looking for a clean break, not ending up with it still in the Rubicon 'portfolio'

Another few years for the board and management to ponder the future