Samuel Terry Asset Management announced on May 3 its plan to buy up all existing KIPT shares for $1.05 apiece, which was the closing price of the shares on April 30.
The month-long offer period is set to begin tomorrow (May 18) unless extended or withdrawn under the Corporations Act.
STAM is already a substantial shareholder with 14.8 million shares, which equates to about 26 per cent of KIPT’s holdings.
KIPT’s share price has risen almost 10 per cent since the initial announcement to $1.15 this morning, giving it a market cap of about $64 million.
However, in a statement to the ASX today, the KIPT board unanimously recommended shareholders ignore documents from the Sydney-based investment firm in a bid to thwart the takeover bid.
Labelling the offer “opportunistic”, it said shareholders should reject the bid because it undervalued the company, didn’t include a “premium for control” and would prevent investors from future financial benefits.
“The offer price of $1.05 compares unfavourably to KPT’s net asset value of $1.97 per share, as calculated based on the financial report of KPT for the half-year ending 31 December,” KIPT said.
It said its land value – which equated to $1.05 per share – was conservative.
“The international market price for hardwood chip is increasing and domestic demand for softwood log is at a historic high,” it said.
“Shareholders that decide to sell now will lose the opportunity to participate in potential upside arising from options available to KPT with or without approval for the Smith Bay Seaport.”
The company is waiting on a State Government decision on its proposed $40 million jetty and handling facility at Smith Bay on the island’s north coast.
The proposal has been declared a major project and has been on hold pending a final decision from the Marshall government, following public consultation in February.
STAM made the offer in its capacity as trustee for Samuel Terry Absolute Return Active Fund.
KIPT said shareholders who accepted an offer would be unable to withdraw from the deal.
The timber firm last month rejected a separate $20 million offer to buy the majority of its forestry land and use it for farming, saying the bid was “far below book value”.
That offer was made by KI Phoenix – which is partly owned by national farmland investment manager AAG Investment Management – to buy 15,600 hectares of KIPT’s land and return bushfire-hit forest to agricultural land.
About 95 per cent of KIPT’s plantations were impacted by the devastating fires that tore through the island in December 2019 and January 2020. The company has received more than $60 million in insurance compensation payouts since the fires and is in a race against time to salvage damaged timber and transport it to export markets before it rots.
The company owns about 25,000ha of “productive Kangaroo Island land” of which 14,200 was forests and a further 7300ha is native vegetation.
It has cash and cash equivalents of $35.5 million and is debt-free.
KIPT also has an estimated 4.5 million tonnes of fire-affected timber on the island, which it began shipping to mainland sawmills via the SeaLink passenger ferry service in February. In March, the first barge of logs was dispatched from Kingscote to South Korea via Port Adelaide.
The company estimates it has two years before its burnt softwood pine trees rot, while its hardwood blue gums could potentially last up to five years.
Local News Matters
Media diversity is under threat in Australia – nowhere more so than in South Australia. The state needs more than one voice to guide it forward and you can help with a donation of any size to InDaily. Your contribution goes directly to helping our journalists uncover the facts. Please click below to help InDaily continue to uncover the facts.