Great Southern in MIS buy-out move

Perth-based agricultural investment manager Great Southern Ltd has announced a major restructure of its business that would involve the company raising $438 million by buying out the interests of investors.

Under the proposed restructure, Great Southern will be divided into three business divisions - forestry, agricultural investments and cattle - to provide more regulatory certainty to shareholders.

Central to the restructure is a proposal to buy-out the interests of MIS investors in eight projects - six hardwood projects and two cattle projects - in exchange for Great Southern Ltd shares.

The proposal is expected to net the company $438 million through the issue of shares at $1.10 each.

Only high-value timber and pulpwood tax-effective MIS products will be sold in the foreseeable future, with the removal of the MIS structure around cattle business.

A cost reduction program has already started, with staff numbers reduced by more than 50.

The restructure follows a full strategic review of Great Southern's existing business, started in May, shortly after the departure of founder John Young from a full-time operational capacity.

The review concluded that the company needed to take advantage of existing strategic assets, including the large forestry land estate and management skills.

It also said the company needed to grow existing agricultural funds management business and maximise value from its significant cattle land estate, and reduce costs and overheads.

Managing director Cameron Rhodes said the proposals, if approved, would transform the company, creating an integrated forestry business with additional revenue and cash flows from both forestry and cattle to complement existing tax-effective MIS business.

"This addresses many of the issues we currently face and meets the strategic objectives that we have set," he said in a statement.

"We are very confident that if all eight proposals are supported, this transaction will add significant value to all stakeholders at a number of levels."

The MIS industry faced a challenging capital raising year during 2007-08, influenced by volatility in global credit markets and the Australian Tax Office's decision to essentially stop non-forestry MIS.

Total MIS sales for 2007-08 were slightly down on last year at $314 million, which included $212 million of forestry MIS sales, according to the Australian Agribusiness Group.