Tree seedling company ArborGen has agreed to sell its New Zealand and Australian assets to a consortium led by Hugh Fletcher for NZ$22.25 million. ArborGen is one of the last remnants of the former Fletcher Forests, and has a range of nurseries producing seedlings for the timber and agriculture industries. Source: Stuff NZ
The company disclosed in June that it was undertaking a strategic review on its future options after receiving a bid.
The company produces about 30 million tree stocks a year in New Zealand and 5.5 million in Australia and would require “significant” additional capital to expand capacity, ArborGen chairman David Knott said in a statement to the NZX.
The board believed the money would be better spent in its higher growth markets in the United States and Brazil, he said. It would also use the funds to explore new growth opportunities and repay debt.
The purchasers were a consortium of New Zealand investors including charitable trusts and private families, led by Hugh Fletcher who was a director of ArborGen predecessor Rubicon until September 2019.
An independent assessment of the deal by corporate advisory firm Grant Samuel found the offer was above the mid-point of its valuation range of between NZ$20.7m and NZ$23m and was “fair”. The deal is due to settle at the end of this month.
ArborGen, which is now based in South Carolina in the US, owns one of the world’s largest and most diverse genetic libraries for commercial tree germplasm, and is one of the world’s largest providers of advanced genetic seedlings.
In New Zealand and Australia, where it has seven nurseries and two orchards, its key seedling species are radiata pine, eucalyptus and other native horticultural species. The operations generated US$9.9m (NZ$14m) of revenue last year, making up 19% of the group’s US$52.7m revenue.
The company’s New Zealand orchards are in Awatere in Marlborough and Whirinaki in Hawkes Bay. Its nurseries are in Kaikohe, Te Teko, Puha, Tokoroa, Nelson and Edendale. It also has one nursery in Victoria, Australia.
ArborGen is the only seedling provider in New Zealand with operations throughout New Zealand. It is the primary supplier to some of the largest forest landowners in New Zealand, with two thirds of its local revenues last year coming from its top 10 customers.
“After nearly a decade of slow growth, forestry planting is growing strongly in both New Zealand and Australia, driven by robust market conditions,” according to the Grant Samuel report.
In New Zealand, the growth has been driven by demand for replanting as forest estates planted in the 1990s are harvested, strong demand from domestic processing operations and export markets such as China, reforestation and forestation projects to reduce carbon emissions, and the Government’s One Billion Trees programme, the report said.
That’s led to a major increase in plantings, with a doubling in overall radiata seedling demand to its current level of about 90 million treestocks planted a year, plus another 10-to-15 million a year of douglas fir, manuka, eucalyptus and native trees, the report said.
Seedling sales are expected to grow to about 100 million units for the 2021 season, the report said.
