TL;DR:
- The NZ Rural Land Company sells 25% of its land holdings to Australian investment fund Roc Partners for $44.2 million, a premium to its NZX share price.
- The transaction includes transferring NZL’s assets (except cash) into a limited partnership, with Roc subscribing for a 25% equity.
- Proceeds will repay a convertible note and fund growth, with NZL retaining nearly 15,000 hectares of rural land for forestry and dairying.
In a significant cross-Tasman deal, the NZ Rural Land Company (NZL) has divested a quarter of its land equity to Roc Partners, an Australian investment fund, for a sum of $44.2 million. This transaction, finalised on February 9 following its announcement on January 19, was executed at a value implying between $1.25 and $1.30 per share, notably above NZL’s share price of 84c at the time of disclosure.
Since the announcement, NZL’s share price has appreciated to 95c, juxtaposed against a net tangible asset value of $1.50 as of the end of 2022. NZL successfully obtained a waiver from the NZX’s usual requirement for shareholder approval for such transactions, arguing it was in the best interest of the company and its shareholders.
The deal’s structure involves transferring NZL’s assets, excluding its cash reserves, into a limited partnership (LP), which will also incorporate a Rabobank revolving credit facility. Roc Partners will then acquire a 25% stake in this LP.
The governance of the LP will see a board composed of three directors from NZL and one from Roc, ensuring the business strategy remains consistent with NZL’s direction. The NZRL Management Company, now under the full ownership of Allied Farmers, will continue overseeing both NZL and the newly formed LP.
The proceeds from this sale are earmarked for repaying an $11.8 million debt from a convertible note drawn in April 2023, which had partially financed a $71 million forestry acquisition. The remaining funds are allocated for working capital and exploring new growth avenues.
NZL’s portfolio spans nearly 15,000 hectares of rural land, with a significant portion in forestry in Manawatū-Whanganui and the rest dedicated to dairying and support in Canterbury, Otago, and Southland. These lands are managed by tenants under long-term leases, featuring regular CPI-adjusted rental increases.
Rob Campbell, NZL’s chair, reassured shareholders that the Roc transaction, being at a subsidiary level, would not dilute their holdings. Despite the economic interest in the land portfolio reducing to 75%, the transaction injects approximately $30 million in cash to bolster earnings, executed at a considerable premium to the market price before the deal.
Consequently, NZL shareholders now possess 75% of the total assets, valued at around $132 million, aligning closely with the current share price. Campbell highlighted that the transaction’s proceeds, coupled with the premium valuation, favourably compare to NZL’s current market capitalisation.
