NZ Rural Land Company has sold 25% of its land equity to an Australian investment fund managed by private investor, Roc Partners, at a premium to its share price on the NZX market.
The agreement was settled on February 9 after being announced to the share market on January 19.
Roc paid $44.2 million at an implied value between $1.25 and $1.30 a share compared with the NZ Rural Land Company (NZL) share trading price of 84c at the time the deal was first announced.
The share price has since risen to 95c, against a net tangible asset value of $1.50 (at the end of 2022).
NZL obtained a waiver from the NZX requirement that shareholder approval be sought before entry into the transaction, on the grounds that was in the best interests of NZL and its non-interested shareholders.
The two-step transaction will transfer the assets of NZL (except cash on hand) into a limited partnership (LP) along with a Rabobank revolving credit facility.
Roc Partners will subscribe for a 25% equity in the LP.
The board of the general partner will consist of three directors from NZL and one from Roc.
The business strategy will remain unchanged and the NZRL Management Company, now wholly owned by Allied Farmers, will continue to manage both NZL and the new LP.
NZL will use the proceeds to repay the $11.8 million owing on a convertible note that it drew down in April 2023 to partially fund its $71m forestry acquisition.
The balance of the funds will be used for working capital while new growth opportunities are investigated.
NZL currently owns nearly 15,000 hectares of rural land of which 3147ha are in forestry in Manawatū-Whanganui and the remainder under dairying and support in Canterbury, Otago and Southland.
The farms and forests are run by tenants, who have leases for around eight years in pastoral and 19 years in forestry, both types containing regular CPI rental increases.
NZL chair Rob Campbell said shareholders will not be diluted because the Roc transaction is occurring at a subsidiary level.
While the economic interest in the land portfolio had been reduced to 75% there will be an approximately $30m cash injection to grow earnings and the transaction was at a considerable premium to the previous prevailing share price.
However, NZL shareholders now have 75% of the total assets instead of 100% previously and the implied value of their stake is around $132m, about where the share price has settled.
“This, together with the proceeds of the transaction, represents a premium to the current market
capitalisation of NZL,” Campbell said.
