The battle for Great Southern's plantation schemes has stepped up today with the Tony Jack-led Black Tree releasing details of its proposal while the Gordon Martin-backed Pulpwood Plantations hits out at rival bidder Gunns.
The battle for Great Southern's plantation schemes has stepped up today with the Tony Jack-led Black Tree releasing details of its proposal while the Gordon Martin-backed Pulpwood Plantations hits out at rival bidder Gunns.
Great Southern receivers McGrathNicol today selected Gunns as its preferred proponent as the responsible entity for the all or the majority of the plantation schemes, taking over from from Great Southern Managers Australia Ltd.
Details of Gunns' proposal for the schemes remain confidential. Gunns has been in talks with McGrathNicol since October.
Mr Martin told WA Business News that he was not surprised by McGrathNicol's decision to back Gunns.
"Effectively what they've done is that they've reached an agreement which gets rid of some problems for the receiver and gets rid of some of the encumbrances on the land and the legal issues which cost the grower," he said.
Mr Martin added that should Gunns gain responsibility of the schemes, there were all sorts of conflicts, with the timber company already holding 15 managed investment schemes of its own.
In addition, Mr Martin said Gunns were currently highly geared with high borrowings and it was also looking at additional borrowings for its pulp mill.
"So you might well find it's an exact repeat of where Great Southern was," he said.
Mr Martin, who is the chairman of Coogee Chemicals, is largely bankrolling the $10 million to $20 million Pulpwood bid for all but one of the plantations.
He also recently joined forces with former Perth Glory owner Nick Tana to pitch the bid for the schemes.
Mr Martin said the Pulpwood bid will continue as per normal and will go ahead with making the offer to investors, or growers, with a shareholder vote on the proposal set for early next month.
Meantime, rival bidder Black Tree has today released details of its proposal for the Great Southern 1999 to 2008 plantations.
Black Tree has proposed to pool the schemes which will enable all the plantations to be managed as a single forestry estate
"The pooled structure allows the projects to become self financing through the use of a portion of the earlier project harvest proceeds to pay later project maintenance costs," Black Tree executive chairman Mr Jack said.
"This will reduce the cost of, and reliance on, external finance and will increase the amount of overall cash available to be distributed to growers."
Black Tree also intends to make a cash offer to growers in the 1999 to 2003 projects who would rather receive an upfront payment rather than remain in the pool structure.
The proposal also includes giving growers control over the responsible entity and a low fee structure of 5 per cent of net harvest proceeds.
Black Tree will also seek rights for growers with a sub-lease on Tiwi Islands and other properties where the head-lease has been terminated by McGrathNicol.
"Based on Black Tree's proposal we assess that the returns to growers over the next 10 years from the Black Tree proposal will exceed those offered by the [Pulpwood Plantation] proposal by in excess of $100 million," Mr Jack said.
Late this afternoon, Gunns released details of its proposal which would see the timber company receive a percentage, ranging from 4.5 per cent to 55 per cent, of the 1998 to 2006 pulpwood schemes' net harvest proceeds when the timber is harvested.
The increased charges enable Gunns to meet the expenditure required to properly manage the plantations through to harvest, the company said.
Gunns has also proposed to reduce the rental on some freehold land hosting some of the schemes in return for termination of any potential option to extend the leases to include a second rotation.
In addition Gunns has also proposed to acquire certain forestry assets of the Great Southern group, including property, plant and equipment and water licences, for $8.7 million.
The timber company will also make an offer of employment to the forestry managed personnel of the schemes.
Debt-laden Great Southern went into administration on May 16. McGrathNicol was appointed receiver on May 18.
Yesterday, at a second meeting of creditors convened by administrator Ferrier Hodgson, creditors voted in favour of 27 of the 35 companies in the Great Southern group being placed in liquidation.
The vote on the future of the remaining eight companies was adjourned until December 3.
Part of Black Tree's announcement is below:
Overview and Key Benefits of Black Tree's proposal
- Black Tree proposes to be appointed the manager of all Great Southern pulpwood projects (1997 - 2008). Black Tree will undertake all operations required to deliver the plantations to harvest. The Black Tree team are experienced and expert forestry managers who are committed to maximise the plantation value delivered to Growers.
- Black Tree proposes to create a "pooled structure" incorporating the 1999 - 20087 projects. Under the structure the operating costs and harvest returns of all these projects are combined with Growers receiving a share of the net harvest proceeds of all the schemes as they are harvested rather than proceeds only from the scheme to which they initially invested.
- The pooled structure will improve operational flexibility and reduce costs so maximising returns available to be redistributed to growers.
- Black Tree proposes to fund all operational costs of the plantations with these costs to be repaid from harvest revenue. Black Tree's proposal will not require any further financial contributions from growers.
- Black Tree proposes a low fee structure at 5% of net harvest proceeds that is directly aligned with Growers desired outcomes and incentivises Black Tree to maximise total grower returns.
- Black Tree's proposal seeks to maintain the rights of all Growers. In particular, it is intended that Growers with a sub-lease on Tiwi Islands and other properties where the head-lease has been terminated by McGrathNicol will retain their interest in the project to the extent permitted by law.
- Black Tree's proposal will maintain Growers tax position. Previous tax deductions are not expected to be jeopardised and tax liabilities for growers are not expected to be crystallised. Furthermore, tax deductions for interest expenses on loans will remain deductible, something not guaranteed with alternative proposals.
In addition to the pooling proposal Black Tree intends to make a cash offer to Growers in the 1999 - 2003 projects, so providing an alternative for those investors who would prefer to receive an upfront cash payment rather than remaining in the pooled structure to extract maximum value over the life of the pool
Pooling
Under the Black Tree proposal, the 1999 - 2008 Great Southern pulpwood projects will be 'pooled', with growers receiving a share of the pooled proceeds of future harvests.
Pooling will enable Black Tree to manage the 1999 - 2008 projects as one forestry plantation estate, which will result in a number of financial and operational efficiencies.
The share of the proceeds growers receive will be based on an assessment of the relative current value of the projects participating in the pooled structure through the offer, and will be fixed for the life of the project. The share of the pool allocated to each project has been reviewed by an independent expert to ensure that it is fair and reasonable.
"The pooled structure allows the projects to become self financing through the use of a portion of the earlier project harvest proceeds to pay later project maintenance costs. This will reduce the cost of, and reliance on, external finance and will increase the amount of overall cash available to be distributed to growers," Mr Jack said.
"As a result, all growers will receive materially superior returns to those offered by the alternative proposals. Growers in early projects will receive almost twice the cash they can expect under alternative proposals. All growers will see their plantations managed through to maturity without having to contribute any additional funds."
"Pooling also enhances growers' geographic and climatic risk management, enabling self insurance and subsequent cost savings, and optimises across-scheme performance."
It is proposed that the 1997 and 1998 projects will be managed by Black Tree without any change to the project structure. For these projects harvesting is close to being finalised, so they will be managed as separate projects through to their imminent completion.
Cash offer
Subject to its pooling proposal being approved by Growers, Black Tree will make a cash offer to growers in the 1999 - 2003 projects who would prefer to exit their investment immediately rather than extract maximum value over the longer harvest period proposed under the 'pooling' arrangements.
This will provide growers with significant flexibility to consider which alternative is best suited their individual financial circumstances.
