NSW - Asset value singed by fires

Wednesday 22 Jan 2020

NSW forests sell-off value singed - The bushfires blazing through NSW are understood to have inflicted a $400 million to $500 million haircut on the state’s plans to privatise forestry assets. Street Talk can reveal NSW and its advisers have updated interested parties on the proposed privatisation for the Forestry Corporation of NSW's softwood forests in recent days, in light of the fires.

Sources said potential buyers and advisers were told the ongoing fires had given the government pause on its privatisation plans – and there was still a chance the sale process could be postponed indefinitely.

However, the upshot is that it’s going ahead for now, although the deal will be smaller than what was originally proposed because fire has damaged an estimated 40,000 to 50,000 hectares.

Early numbers being bandied around suggest a $700 million to $800 million-odd sale, rather than a $1.2 billion deal, sources said.

The advisory team is spearheaded by investment bank UBS and includes law firm MinterEllison, KPMG’s number crunchers and forestry and agricultural industry consultants Margules Groome.

What's up for sale? - Up for sale is the Forestry Corporation of NSW's profitable softwood division, which consists of about 230,000 hectares of radiata pine forests, primarily producing timber for use in house construction.

Sources said there are a handful of logical acquirers on the hitlist of NSW and investment bank UBS (whose team is led by Kiwi Chris Simcock) – and they’re the sorts of names in and around Australia’s forestry industry.

Privately owned plantation land manager New Forests, which was founded in 2005 and claims to have $5 billion invested in forestry assets across the Asia Pacific and US, has been quick to signal its early interest.

Sources said New Forests was in front of advisory firms seeking a financial adviser to work on its slated bid. It is understood New Forests sent a request for proposal to about half a dozen advisers including Morgan Stanley, Cameron Partners and Gresham, each of which has form in forestry transactions.

A beauty parade would get under way in coming weeks, sources said.

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Source: Street Talk in Australian Financial Review


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