Rubicon

[Leftfield]

Wonder how the trees in Carolinas are doing

At last we have an answer Winner......"Mr Knott said that none of ArborGen’s seven US nursery facilities or any of its current year crops sustained damage, and that the Company’s previously provided US-GAAP EBITDA1 guidance for ArborGen of ~US$7 2 million for the current financial year ending 31 March 2019 remained in place."

[minimoke]

At last we have an answer Winner......"Mr Knott said that none of ArborGen’s seven US nursery facilities or any of its current year crops sustained damage, and that the Company’s previously provided US-GAAP EBITDA1 guidance for ArborGen of ~US$7 2 million for the current financial year ending 31 March 2019 remained in place."

Dont miss this bit "Rubicon announced today that its 100%-owned US operating business, ArborGen Inc (“ArborGen”), had sustained damage at only one of its nine orchards in the US South as a result of the recent Hurricane Michael – the third most intense Atlantic hurricane to have ever made landfall in the US, with wind speeds above 250 km/h" Doesnt seem to be major damage though

[Leftfield]

Interesting development

1 November, 2018 - Rubicon announced today that ArborGen Inc ("ArborGen") has

entered into a series of agreements with certain subsidiaries of TexMark

Timber Treasury, L.P. ("Triple T") - a joint venture between CatchMark Timber

Trust, Inc. and a consortium of large institutional investors, that recently

completed the acquisition of Campbell Global's US$1.4 billion of timberlands

located in Texas, US.

The primary agreement is a lease, pursuant to which ArborGen will lease the

Triple T nursery and seed orchard properties located in Texas. This agreement

includes a call option that gives ArborGen the right to acquire the leased

properties, and a corresponding put option that gives Triple T the right to

sell the leased properties, for US$2.5 million payable upon the expiration of

the 5-year lease period. ArborGen's current intention is that it will

exercise the call option at the end of the lease period. The lease agreement

(and subsequent call option exercise) will allow ArborGen to increase its

annual nursery production capacity and sales by approximately 30 million

seedlings per annum (effective from the next production season beginning 1

April 2019 when the lease agreement takes effect), and also immediately

expand its productive seed-orchard capacity (including advanced genetics

seed) in the important Texas region.

[Well Endowed]

Great announcement.

and most importantly:

"ArborGen has also entered into an exclusive multi-year agreement to supply Triple T all of its Texas seedling requirements for an initial term of 5 years, with term-renewal periods thereafter."

[sb9]

Great announcement.

and most importantly:

"ArborGen has also entered into an exclusive multi-year agreement to supply Triple T all of its Texas seedling requirements for an initial term of 5 years, with term-renewal periods thereafter."

All going as per plan.

[iceman]

On the face of it looks like a great announcement with long term benefit. Expanding into Texas must be a good thing and increasing production by 30 million seedlings effective next season is good news and will help ease the production strains RBC is under for the next couple of years. But obviously more nurseries and more production is needed ASAP

[percy]

Yes I too take the announcement as another step in the right direction.

[iceman]

Yes I too take the announcement as another step in the right direction.

Hasn't exactly excited the market though has it ?? No trades in the first hour this morning. How long before the majority owners and Board tire of being listed on the NZX !!

[blackcap]

Hasn't exactly excited the market though has it ?? No trades in the first hour this morning. How long before the majority owners and Board tire of being listed on the NZX !!

That may be, but I do not really see how they can delist effectively. They could try but I am sure that proposal would be voted down by shareholders. Remembering the majority s/h ers would not be allowed to vote on that resolution. So where would Rubicon go?
Or can the board just take a unilateral decision and we have to wear it? Not sure that is possible, PGC had to get s/h approval to move their listing outside of NZ. Someone who knows the rules may be able to help out here.

[Invest in good stories]

Iceman, I suspect the board and major shareholders are already well and truly tired of being listed on the NZX, and if I was in the major shareholders shoes I'd be very closely looking at how they can entirely remove the Rubicon layer and simply have a stake in the Arborgen (US domiciled) business.

Just how they go about this I'm not sure, but I dare say some very skilled tax/corporate lawyers could figure it out. Lets face it, Rubicon is merely a holding company now so just sucks up cost, the big shareholders are all US domiciled (or perhaps a Caribbean island for tax purposes :-)), board directors have increasingly become US domiciled, and most of the revenue is from the US. So just what is the advantage of being listed and domiciled in NZ? Not much that I can see and certainly NZ domicile and NZX listing would add tax complications/costs for the US major shareholders.

So I'm picking at some point that all the shareholders of Rubicon get "asked" to become shareholders in Arborgen (or a US offshoot). Perhaps by being a shareholder in Rubicon, you get rights to shares in Arborgen as well? This could be via a major transaction approach, and perhaps by a step-by-step process Rubicon then delists from NZX. Shareholder approval rules are complicated but I believe its only a vote to delist that may see shareholders holding more than 10% not able to vote. Major transactions (such as an "offer" to hold shares in Arborgen) can I presume be voted on by all shareholders (so the big boys get to vote and its guaranteed to pass). A step-by-step process may mean that when it comes time for the delisting vote, even the tinest shareholder will vote for it because at that point it just makes sense.

The big driver for all of this won't be the costs of keeping Rubicon going - that's relative trivia. The driver will be either tax advantage to the US based major shareholders (it may be disadvantageous to NZ domiciled shareholder) and/or access to capital/buy out offers. Sometimes though at least, when companies do look to swap shores, an offer to purchase shares at a premium is made to minor shareholders at the time so as to remove complexity/upset (and it may make the whole legal process easier).

IMHO I really can't see Rubicon being NZX listed or domiciled in NZ long term. I'm not a tax/corporate lawyer who will be figuring out just how it is done exactly, but if the mighty $ benefit stacks up, why wouldn't the major US based shareholders want this? Along with the business plan for Arborgen, its going to fascinating how this one plays out in the next couple of years - short of another GFC however I think there's good upside here.