Ex-manager may bid for Phaunos Timber – Stafford Capital Partners Limited, in its capacity as manager of Stafford International Timberland VIII Fund (“SIT VIII”), has announced a possible all-cash offer of US$0.49 per Phaunos Timber share to be made by SIT VIII (or by Stafford or an entity controlled by Stafford or funds managed by it).
The possible cash offer represents:
- a premium of approximately 11 per cent. to the closing price of US$0.44 per Phaunos share on 4 June 2018,
- a modest discount of approximately four per cent. to the net asset value as at 31 December 2017.
- a total equity value for Phaunos of approximately US$244.2 million (on a fully diluted basis).
Phaunos shareholders would have an opportunity to accelerate their exit from Phaunos and receive value for the entirety of their holding in cash within an expected timetable of 3 to 4 months as opposed to receiving a series of distributions which the Phaunos board has indicated it expects to make in connection with the managed wind-down process over the 14 to 20 month period from the end of April 2018 with the potential for this period to be extended. The Phaunos Board would get to sell Phaunos’s entire portfolio of assets in a single corporate sale of the entire business without the need for a prolonged due diligence process (which would include the Aurora Forestal asset in Uruguay, the sale of which the Phaunos board has announced will be delayed until further notice).
Commenting on the possible cash offer, Stephen Addicott, Partner at Stafford said: “For nearly four years, Stafford worked diligently to improve the performance of Phaunos for the benefit of its shareholders. As the manager at the time of the Continuation Vote, we made clear our view that Phaunos had a positive future. However, we accept the decision of Phaunos Shareholders to implement the managed wind-down process and therefore believe that the sale of Phaunos to Stafford is a logical and viable alternative to this process. We are firmly of the view that an offer to acquire the entirety of the Phaunos portfolio in a single transaction represents the most attractive opportunity for Phaunos Shareholders to realise their investment in a timely and efficient manner.
Throughout our tenure as investment manager of Phaunos, we sought to increase the transparency of the Company, including by engaging in detailed discussions with Phaunos Shareholders on each of the assets within the portfolio. We would welcome the opportunity to discuss with Phaunos Shareholders our Possible Cash Offer and we hope that the Phaunos Board will acknowledge the merits of the Possible Cash Offer and be willing to recommend that Phaunos Shareholders accept an offer by Stafford for Phaunos, should it be forthcoming.”
Background
At Phaunos’s 2017 AGM, the majority of votes submitted were against continuing the company and the shareholders subsequently approved an orderly realisation of its assets. Pöyry were appointed as sales agents on 28 November 2017 to manage this wind-down process. The board has indicated that the realisation process may take between 14 and 20 months from the end of April 2018, and has highlighted that this timeline is subject to material uncertainties, which may result in extensions of it. Indications of interest from prospective purchasers are expected to have been received by July 2018. The Phaunos board has also stated that the preparation work for the disposal of the Aurora Forestal asset has been impacted from a timing perspective.
Stafford was the investment manager from July 2014 until February 2018.
On 11 May 2018, Stafford announced the final close of SIT VIII of US$612.5 million of which Stafford has already invested US$128 million (representing approximately 21 per cent. of the funds raised by SIT VIII). Stafford has had two meetings with the chairman of Phaunos to discuss the possibility of Stafford acquiring all the assets of Phaunos on an expedited basis. Regrettably, the discussions with Phaunos did not progress.
With the SIT VIII transaction pipeline totalling more than US$1.1 billion, Stafford is not prepared to set aside the required capital for a prolonged and potentially piecemeal sale process. Consequently, Stafford will not be participating in a drawn out disposal process.
The NAV at end December 2017 was US$0.51, down from US$0.55 per share as at 31 December 2016. The expected realisation range stated by the board is US$0.45 – US$0.57 per share.
Deadline
Stafford will make a further announcement in due course. In accordance with Rule 2.6(a) of the Code, Stafford is required, by not later than 5.00 p.m. on 3 July 2018, either to announce a firm intention to make an offer for Phaunos in accordance with Rule 2.7 of the Code or to announce that it does not intend to make an offer. This deadline can be extended with the consent of the Panel in accordance with Rule 2.6(c) of the Code.
PTF : Ex-manager may bid for Phaunos Timber