8-K: Rayonier to Sell New Zealand Joint Venture Interest for $710 Million

Rayonier Inc. has reached an agreement to sell its 77% interest in a New Zealand joint venture to a special purpose vehicle formed by The Rohatyn Group for $710 million, subject to adjustments.

Summary

• Rayonier Inc. has agreed to sell its 77% interest in a New Zealand joint venture to Taurus Forest Holdings Limited for $710 million, subject to adjustments for cash, debt, and working capital.
• The purchaser, Taurus Forest Holdings Limited, is a special purpose vehicle formed by Ents LP, an investment fund managed by The Rohatyn Group (TRG).
• The transaction is expected to close in 2025, pending regulatory approvals and other closing conditions.
• The sale aligns with Rayonier's strategy to focus on its U.S. operations and capitalize on the difference between public and private timberland values.
• Rayonier anticipates using the proceeds to reduce leverage, return capital to shareholders, and reinvest in synergistic acquisitions.
• The company expects the transaction to be modestly accretive to pro forma CAD per share and reduce pro forma Net Debt to Adjusted EBITDA to approximately 0.3x.
• Rayonier anticipates a special dividend for 2025 of $1.00 to $1.40 per share, to be announced later this year.

Sentiment

Score: 8

Explanation: The announcement is positive due to the high sale price, expected debt reduction, and planned special dividend. The strategic focus on U.S. operations is also viewed favorably.

Positives

• The sale will allow Rayonier to concentrate its capital in core U.S. markets with favorable long-term growth prospects.
• The transaction is expected to be modestly accretive to pro forma CAD per share.
• Rayonier's pro forma Net Debt to Adjusted EBITDA is expected to decrease to approximately 0.3x.
• The company plans to use the proceeds to reduce leverage and return capital to shareholders.
• The sale simplifies and streamlines Rayonier's portfolio, financial reporting, and overall value proposition.

Risks

• The transaction is subject to regulatory approvals, including antitrust approvals in China and South Korea, and approvals under the Overseas Investment Act 2005 and the Overseas Investment Regulations 2005 of New Zealand.
• The transaction is subject to the accuracy of representations and warranties and the performance of covenants by both parties.
• The Purchase Agreement can be terminated if the transaction is not consummated by December 9, 2025.
• The cyclical and competitive nature of the industries in which Rayonier operates could impact future results.
• Fluctuations in demand for Rayonier's products in Asia, especially China, could impact future results.

Future Outlook

Rayonier expects the transaction to close in 2025 and anticipates a special dividend for 2025 of $1.00 to $1.40 per share, subject to the transaction's completion. The company aims to use the proceeds to reduce leverage, return capital to shareholders, and reinvest in synergistic acquisitions.

Management Comments

• Mark McHugh, President and Chief Executive Officer of Rayonier, stated that the decision to sell the New Zealand joint venture interest is the best path forward to create value for shareholders.
• McHugh noted that the New Zealand business lacks meaningful synergies with Rayonier's core U.S. operations and that the value of the New Zealand joint venture is not fully appreciated in the public markets.
• Nick Rohatyn, Partner, Founder and Chief Executive Officer of TRG, stated that TRG is delighted to acquire Rayonier's New Zealand business and looks forward to continuing a highly productive and successful operation over the long term.

Industry Context

This announcement reflects a trend of timberland companies optimizing their portfolios by divesting assets in certain regions to focus on core markets. The sale allows Rayonier to concentrate on its U.S. operations, aligning with a broader industry focus on maximizing shareholder value through strategic asset allocation.

Comparison to Industry Standards

• The sale price implies an enterprise value of $3,213 per productive acre, which is a significant increase over historical acquisition costs.
• The transaction multiple of ~18x three-year average (2022-24) EBITDA and ~30x three-year average (2022-24) timber-only EBITDA (excluding EBITDA from carbon credit sales) is within the range of recent timberland transactions.
• Weyerhaeuser, a major competitor, also focuses on timberland ownership and management, but primarily in North America, making Rayonier's move a strategic alignment with its core geographic focus.
• The Rohatyn Group's acquisition aligns with its strategy of investing in real assets, particularly in the forestry sector, and leveraging its expertise in managing global forestry assets.

Stakeholder Impact

• Shareholders will benefit from the special dividend and potential share repurchases.
• Employees in the New Zealand business will transition to new ownership under The Rohatyn Group.
• The transaction will allow Rayonier to focus on its U.S. operations, potentially leading to increased investment and growth in those markets.

Next Steps

• Rayonier will seek regulatory approvals for the transaction.
• Rayonier will file its Quarterly Report on Form 10-Q for the fiscal quarter ending March 31, 2025.
• Rayonier will announce details of the special dividend for 2025 later this year, following the closing of the sale.

Key Dates