TIDMPTF TIDMTTM TIDMPTFA
RNS Number : 9300B
Phaunos Timber Fund Limited
26 September 2018
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR
INDIRECTLY (IN WHOLE OR IN PART), IN, INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF
THAT JURISDICTION. THIS ANNOUNCEMENT DOES NOT CONSTITUTE A TAKEOVER
OFFER OR AN OFFER OF SECURITIES.
26 September 2018
Phaunos Timber Fund Limited ("Phaunos" or the "Company")
Rejection of Stafford's Final Offer and Publication of
Circular
Further to the Company's announcement on 24 September 2018, the
board of Phaunos (the "Board") announces that it is today
publishing its circular (the "Circular") in connection with the
final revised cash offer made by Stafford Capital Partners Limited
("Stafford") to acquire the entire issued and to be issued share
capital of the Company (the "Final Offer").
A letter from the Chairman of Phaunos to Phaunos Shareholders,
as set out in the circular, has been extracted below.
LETTER FROM THE CHAIRMAN
PHAUNOS TIMBER FUND LIMITED
(A closed-ended investment company incorporated in Guernsey with
registered number 45564)
Directors Registered office
Richard Boléat (Chairman) Ground Floor, Dorey Court
Jon Bridel Admiral Park, St Peter Port
Brendan Hawthorne Guernsey, GY1 2HT
info@phaunostimber.com
www.phaunostimber.com
26 September 2018
Dear Shareholders,
Thank you for taking the time to read this document. It contains
important information with regards to your shareholding in
Phaunos.
As you are aware, following Stafford's unsolicited cash offer
for Phaunos (valuing the Company at US$0.49 per Share) on 31 July
2018 (the "Offer"), the Company published its response circular on
14 August 2018 ("Response Circular"), setting out the Board's
belief that the Offer was inadequate and not in the best interests
of Shareholders. On 14 September 2018, Stafford made a final
revised cash offer for the entire issued and to be issued share
capital of the Company (the "Final Offer"), which values the
Company at US$0.52 per Share.
For the reasons set out in the Response Circular and reiterated
below, it is the Board's belief that the Final Offer remains
inadequate and not in the best interests of Shareholders.
Stafford's Final Offer is not Shareholder friendly and was made
without any prior consultation with the Board as to the level of
that Final Offer
As indicated in the Response Circular, Stafford's approach has
not been made with the best interests of Shareholders in mind. As
you are aware, Stafford was given the opportunity to participate in
the Asset Realisation Process but declined to do so, opting instead
to pre-empt that process with an Offer (and now the Final Offer)
that undervalue Phaunos and would, were Stafford to succeed,
deprive Shareholders of the benefits of a competitive process
designed to maximise value.
Phaunos notes that the increased offer from Stafford was made
without any prior consultation with the Board as to the level of
that Final Offer. The Board notes that the Final Offer is not
capable of any further revision.
Stafford's Final Offer undervalues Phaunos: there is material
upside from the Asset Realisation Process compared to Stafford's
Final Offer
The Board has reviewed and considered the Final Offer in
conjunction with a review of the status of the ongoing disposal of
the Company's asset portfolio under a formal sale process (the
"Asset Realisation Process") and taking into account the guidance
received from its legal advisers with respect to the Rayonier
Canterbury LLC ("Rayonier") dispute (as further discussed
below).
As set out in the chairman's statement for the unaudited interim
results of Phaunos published on 7 September 2018, the Asset
Realisation Process has now moved into a new phase where bidders
are preparing to commence, and in some cases have already
commenced, due diligence including site visits, with a view to
receive binding offers during Q4 of 2018.
Regarding the assets which are not part of the Asset Realisation
Process, negotiations on the possible disposal of the interest in
Aurora Forestal are progressing well and various options are being
explored to effect an exit. GTFF is currently in the process of
realising its portfolio and expressions of interest and / or
non-binding bids have been received for all assets in the
portfolio.
The Board reiterates that all bidders for Matariki Forestry
Group ("Matariki") have indicated to the Board that they are
expecting the OIO process to take between 3 and 6 months. These
bidders are experienced in dealing with the OIO and have a detailed
understanding of what is required to effectively navigate the
consent process.
As mentioned in an announcement on 21 August 2018, new overseas
investment rules applying to forestry transactions were passed by
the New Zealand Parliament and will come into effect by around mid
to late October 2018. The Board has been advised by its New Zealand
legal counsel that the new rules should result in an easier and
quicker OIO consent pathway for prospective bidders who meet the
new criteria.
Taking these factors into account, the Board:
-- reiterates its asset realisation range of US$0.54-0.60 per
Share as set out in the Response Circular (the "Asset Realisation
Range"); and
-- continues to believe that the disposal of all the assets
which are subject to a sale process under the Asset Realisation
Process will complete between Q1 and Q3 2019, which would cover the
sale of assets comprising approximately 92% of the Portfolio
Value.
The Board notes Catchmark Timber Trust, Inc.'s possible offer of
US$0.57 per Share made on 6 September 2018 as a validation of the
Asset Realisation Range.
The Board notes the letter from Stafford sent to Shareholders on
25 September 2018 ("Stafford's Letter") which contains no new
information on Stafford's inadequate proposal and includes a number
of misleading and self-serving statements
The Board therefore seeks in this letter to clarify certain
matters to Shareholders.
1) "FX Adjusted NAV"
Stafford is misleading Shareholders by comparing its Final Offer
to an "FX Adjusted NAV"; the relevant comparable metric is the
Asset Realisation Range.
The FX Adjusted NAV, as described in Stafford's Letter, is based
on values derived from third party appraisers, adjusted downward
for recent foreign exchange movements. Shareholders will appreciate
that the sale values of portfolio assets being sold in the Asset
Realisation Process may vary from those values derived from third
party appraisers.
Accordingly, the Asset Realisation Range of US$0.54-0.60 per
Share is the relevant comparable metric as it takes into account
the values that are being offered for its assets by bidders that,
in the view of the Board and its advisers, are well-capitalised and
highly credible international investors in timber assets.
The Board believes that Stafford's comparison of its Final Offer
to the "FX Adjusted NAV" is unhelpful to shareholders, as it is
comparing its Final Offer to an accounting measure, when it should
be comparing its Final Offer to the Asset Realisation Range.
2) Foreign exchange risks
The Board considers that Stafford has no basis to make the
comment that the outcome of the Asset Realisation Process will be
impacted by foreign exchange movements.
The Asset Realisation Process is a competitive process, in which
Stafford has declined to participate, and the Asset Realisation
Range is based on Indicative Bids that were received and will be
paid for in US dollars.
3) The Asset Realisation Process
The Board notes the comment made by Stafford on timing and
potential complexity associated with the Asset Realisation Process
and reminds Shareholders that Stafford has no access to any
information relating to any of the bidders in the Asset Realisation
Process nor the current status of any of the Indicative Bids. The
main challenges in this process have been as a direct result of
Stafford's hostile approach.
Stafford has always declined to be part of the Asset Realisation
Process despite being invited and instead chose to introduce
uncertainty to that process through the timing of its approach. The
cost cover agreed for due diligence costs is only payable in
certain circumstances where the assets to which it relates are sold
outside the Asset Realisation Process and will be subject to a
cap.
4) Rayonier dispute
The Board has already publicly stated its position on the
Rayonier dispute.
The Board believes that Rayonier's claims are entirely without
merit and that the acquisition notice is invalid, as supported by
Phaunos' UK and New Zealand legal advisors, and designed, like
Stafford's Final Offer, to seek to acquire Phaunos assets at an
undervaluation.
5) Phaunos fees and expenses
The Asset Realisation Range takes into account an assessment by
the Board of the estimated revenue and general operating costs of
Phaunos as well as costs associated with the Asset Realisation
Process (including the fees and expenses associated with advisory
and legal costs in responding to Stafford's offer) through to the
full liquidation of Phaunos (as per the estimated timing described
in the Response Circular).
Shareholders will continue to benefit from distributions
received from Matariki up until completion of the sale of the
Company's stake in Matariki. For reference, the Matariki
distributions for the year ended 31 December 2017 represented
US$0.03 per Share. In light of Matariki's current trading, cash
generation and dividend policy, the Board expects Matariki to
remain a strong contributor to Phaunos's revenue whilst Matariki
remains in the asset portfolio. The Board expects Phaunos's 2018
revenue contribution from Matariki to remain broadly in line with
that of 2017.
The Board of Phaunos has been paid per their contractual
arrangements. There are no additional or incentive payments in
place despite the significant additional workload associated with
defending Phaunos against Stafford's opportunistic approach.
Furthermore, the Board notes that Stafford resigned of its own
volition in August 2017, with its tenure practically ceasing in
February 2018. Since then, Phaunos has not had to pay management
fees to Stafford, which in 2017, 2016 and 2015 totalled US$5.9m,
US$1.4m and US$1.4m, respectively.
THE BOARD'S RECOMMENDATION: TAKE NO ACTION
As announced by the Company on 24 September 2018, taking into
account the Asset Realisation Range and the latest estimated
timeline for the completion of the Asset Realisation Process, the
Board believes that the Final Offer does not provide an attractive
exit opportunity for Shareholders.
Accordingly, and subject to the matters set out above, the
Board, which has been so advised by Evercore, has unanimously
decided to reject the Final Offer from Stafford as it strongly
believes that the Final Offer undervalues Phaunos and recommends
that you should take no action in relation to the Final Offer and
that you should not sign any document which Stafford or its
advisers send to you. In providing advice to the Board, Evercore
has taken into account the Board's commercial assessments. Evercore
is providing independent financial advice to the Phaunos Directors
for the purposes of Rule 3 of the UK Takeover Code.
We will write to you again as may be required to keep you
informed of any further developments.
Yours sincerely,
Richard Boléat
Chairman
Notes:
All capitalised terms shall have the meaning ascribed to them in
the Circular.
1. The US$5.9m comprises US$1.5m of portfolio management fees
and US$4.4m pertaining to Stafford's rights under the warrant
instrument
In accordance with Rule 25.1(c)(ii) of the UK Takeover Code, a
copy of the Circular will shortly be made available on Phaunos's
website at http://www.phaunostimber.com/offer-from-stafford/. A
copy of the Circular has been submitted to the National Storage
Mechanism and will shortly be made available for inspection at
www.morningstar.co.uk/uk/NSM/.
Enquiries:
Phaunos Timber Fund Limited
Richard Boléat (Chairman) +44 (0)1534 625522
Evercore Partners International LLP
(Financial Adviser)
Julian Oakley
Julien Baril +44 (0)20 7653 6000
Winterflood Investment Trusts (Corporate
Broker)
Joe Winkley
Neil Langford +44 (0)20 3100 0000
Rule 26.1 Disclosures
In accordance with Rule 26.1 of the UK Takeover Code, a copy of
this announcement will, subject to certain restrictions relating to
persons resident in restricted jurisdictions, be available on
Phaunos's website at
http://www.phaunostimber.com/offer-from-stafford/ by no later than
12 noon (London time) on the business day following the release of
this announcement. The content of the website referred to in this
announcement is not incorporated into and does not form part of
this announcement. The person responsible for arranging for the
release of this announcement on behalf of Phaunos is JTC Fund
Solutions (Guernsey) Limited (acting as Company Secretary).
Important Notices
This announcement is not intended to, and does not, constitute
or form part of any offer, invitation or solicitation of any offer
to purchase, otherwise acquire, subscribe for, sell or otherwise
dispose of any securities or the solicitation of any vote or
approval in any jurisdiction. Any offer (if made) will be made
solely by certain offer documentation which will contain the full
terms and conditions of any offer (if made), including details of
how such offer may be accepted. This announcement has been prepared
in accordance with English law and the UK Takeover Code, and
information disclosed may not be the same as that which would have
been prepared in accordance with laws outside of the United
Kingdom. The release, distribution or publication of this
announcement in jurisdictions outside of the United Kingdom may be
restricted by laws of the relevant jurisdictions, and therefore
persons into whose possession this announcement comes should inform
themselves about, and observe, any such restrictions. Any failure
to comply with the restrictions may constitute a violation of the
securities law of any such jurisdiction.
Evercore Partners International LLP ("Evercore"), which is
authorised and regulated in the United Kingdom by the Financial
Conduct Authority, is acting as financial adviser for Phaunos
Timber Fund and no one else in connection with the Offer, the Final
Offer and other matters set out in this announcement and will not
regard any other person as its client in relation to the Offer, the
Final Offer and other matters in this announcement and will not be
responsible to anyone other than Phaunos Timber Fund for providing
the protections afforded to clients of Evercore, nor for providing
advice in relation to the Offer, the Final Offer or any other
matter referred to herein. Neither Evercore nor any of its
subsidiaries, branches or affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract or in tort, under statute or otherwise) to any
person who is not a client of Evercore in connection with the
Offer, the Final Offer, this announcement or any statement
contained herein or otherwise. Apart from the responsibilities and
liabilities, if any, which may be imposed on Evercore by FSMA, or
the regulatory regime established thereunder, or under the
regulatory regime of any jurisdiction where exclusion of liability
under the relevant regulatory regime would be illegal, void or
unenforceable, neither Evercore nor any of its affiliates accepts
any responsibility or liability whatsoever for the contents of this
announcement, and no representation, express or implied, is made by
it, or purported to be made on its behalf, in relation to the
contents of this announcement, including its accuracy, completeness
or verification of any other statement made or purported to be made
by it, or on its behalf, in connection with Phaunos Timber Fund or
the matters described in this announcement. To the fullest extent
permitted by applicable law, Evercore and its affiliates
accordingly disclaim all and any responsibility or liability
whether arising in tort, contract or otherwise (save as referred to
above) which they might otherwise have in respect of this
announcement or any statement contained therein.
Winterflood Securities Limited ("Winterflood"), which is
authorised and regulated in the United Kingdom by the Financial
Conduct Authority, is acting as corporate broker to Phaunos Timber
Fund and no one else in connection with the matters set out in this
announcement and will not regard any other person as its client in
relation to the matters in this announcement and will not be
responsible to anyone other than Phaunos Timber Fund for providing
the protections afforded to clients of Winterflood, nor for
providing advice in relation to any matter referred to herein.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ORELAMMTMBITTLP
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