GREAT Southern Plantations and Integrated Tree Cropping are seeking to raise more than $100 million to complete two major deals that position the companies for future growth.
GREAT Southern Plantations and Integrated Tree Cropping are seeking to raise more than $100 million to complete two major deals that position the companies for future growth.
Great Southern is raising $71 million to purchase 84,000 hectares of forestry assets from Challenger Financial Services.
Futuris-backed ITC is planning to raise $38 million to complete its recapitalisation, in conjunction with its listing on the Australian Stock Exchange on March 31.
The two deals come at a time when Agribusiness Research has predicted 20 per cent growth in the amount of money invested in tax-effective agribusiness and forestry investment schemes this year.
Great Southern, along with Timbercorp and Gunns, have dominated this sector over the past two years but are expected to face more formidable competition from ITC in future years.
Agribusiness Research managing director Shane Kelly expects $410 million will be invested in tax-effective schemes this year.
Ironically, the timber assets being purchased by Great Southern were originally owned by Australian Plantation Timber, which is now half-owned by ITC.
“This is a strategic acquisition for Great Southern that secures the additional land resource needed to help satisfy the rapidly increasing market demand for our products,” managing director John Young said.
Great Southern said 55,000ha of the land it is buying is plantable.
Of this amount, 8,800ha have no encumbrances and will be available for use in the company’s managed investment schemes over the next year.
The remaining 46,000ha are currently leased to investors under APT forestry projects, which begin expiring over the next one to two years.
The purchase lifts the total plantable area owned by Great Southern to about 100,000ha.
To fund the deal, Macquarie Equity Capital Markets is undertaking an institutional book build. Existing shareholders will be able to participate in the capital raising via a share purchase plan.
Great Southern’s strategy of buying land contrasts with Timbercorp’s recent sale of land to an infrastructure fund managed by James Fielding Group.
Under a deal worth $46 million, Timbercorp sold 20,500ha of land and will lease back 16,000ha of plantation land.
Timbercorp chief executive Robert Hance said the deal was part of its strategy to reduce net project capital expenditure.
ITC’s listing on the ASX comes more than two years after it acquired a 50 per cent shareholding in APT, which fell into administration in mid 2001.
Since that time, the group pursued two ill-fated strategic initiatives.
The first was an investment in UK company Sustainable Forestry Management, which was to have acquired plantation land in Australia, and the second was a plantation timber joint venture with Timbercorp.
The collapse of both deals prompted ITC’s new board, under temporary executive chairman Tony Davies, to finalise listing plans.
The company is planning to raise $38 million via a one-for-one rights issue, fully underwritten by Patersons Securities.
The capital raising will leave the company debt free and with cash to fund its growth, including land purchases.
ITC’s new chairman will be David Gilham, the former managing director of another Futuris spin-off, Bristile.
The company is also in the process of recruiting a new chief executive.
ITC expects most of its income to be derived from recurring revenue streams.
It has assumed that sales of new managed investment schemes will be about the same level as last year, when it raised $5.2 million.
By contrast, Great Southern raised a record $50 million over the eight months to early March, an increase of 166 per cent.