Rubicon Capital Raising Announced
26 February 2010 - Rubicon Limited announced its intention today to strengthen its balance sheet in light of future funding requirements of the Company, by way of the establishment of a new banking facility and the issuance of a pro-rata entitlement offering. The extracts below (Chairman's Letter and Offer Timetable) from the simplified disclosure prospectus for the Retail Offer (filed for registration with the New Zealand Companies Office, and to be sent to eligible Rubicon shareholders on 8 March 2010) summarise the key points of this initiative.
Chairman's Letter
Dear Shareholders
Following the refinement of our business portfolio to consist of purely our core forestry activities, our strategy over the past five years has been to restructure, build and grow the value of our two remaining investments - ArborGen and Tenon - in readiness for events in each which would bring significant value to Rubicon shareholders. As we have reported to you in some detail in our recent Annual and Interim Reviews and ASM presentations, much has been achieved in this regard, and we are well advanced in this goal.
In terms of Rubicons funding for this goal, our history has seen us use the cash we have generated from the sale of our non-core activities (NZ$125 million) and dividends and capital returns received from our portfolio (NZ$230 million) to both fund our investment into Tenon and ArborGen (NZ$263 million) and to return capital to shareholders (NZ$92 million). Operating cash flow generated internally at ArborGen and Tenon has all been reinvested in growing and strengthening the strategic positioning of the underlying businesses.
Our intention had always been to bring value to ArborGen and / or Tenon for Rubicon shareholders before there would be any shareholder cash-funding need in Rubicon, and we had managed our activities accordingly. We were well on track to meeting our objective until the global credit crisis of the last 18 months took hold. The practical effect of that crisis has been to delay the timing of the eventual ArborGen and Tenon value-events, and hence create a need for further Rubicon funding until market conditions improve sufficiently to allow us to realise value in these investments for Rubicon shareholders. Our desire now is to put in place an overall funding plan that will secure Rubicons cash needs, under normal operating parameters, through to the end of 2011 (should that be necessary), in order to give time for global markets to recover and for more normal conditions to return to equity markets.
Our plan incorporates a mix of bank funding and shareholder capital injection to fill this funding gap through to the end of 2011. The equity component of our proposal is to raise up to NZ$21.4 million (which equates to approximately US$14.7 million at todays NZ:US exchange rate of 0.6891) from our existing shareholders under a pro-rata entitlement offering to all Rubicon shareholders, comprising two separate Offer components - an accelerated initial component that was open only to Substantial Shareholders (the Substantial Shareholder Offer), and a subsequent retail component open to all other Eligible Shareholders (the Retail Offer). US$12.5 million of this will be used to repay all of our existing outstanding bank debt on 31 March 2010, with the remaining US$2.2 million (less expenses) being available for future investment in ArborGen. In addition, we have entered into a new US$15 million bank facility with the ANZ bank. This new facility, which is conditional only upon us repaying in full our existing bank debt on 31 March 2010, has an expiry date of 31 December 2011 and will be used to meet our expected future cash investment needs in ArborGen and Tenon as well as any on-going corporate needs. Our sole focus will be on extracting value in Tenon and ArborGen - we will not be investing in any activities beyond these two existing businesses.
All Directors and Officer of the Company who hold Shares intend to take up their Entitlement under the Retail Offer in full, and I am pleased to inform you that the initial component of the Offer (i.e. the Substantial Shareholder Offer) has closed today, with very strong shareholder support. These commitments, along with those of Board and management, mean Rubicon has, prior to the Retail Offer opening, already secured commitments from more than 70% of Rubicon's total shareholder base, representing approximately NZ$15 million (US$10.3 million). For this reason, the Board has determined that there is no need to incur the costs of having the second component of the pro-rata offer (i.e. the Retail Offer) underwritten.
Under the Retail Offer, Eligible Shareholders will be entitled to acquire 1 New Share for every 7 existing Shares held on the Record Date, at a price of NZ60 cents per New Share. This is exactly the same Entitlement ratio and Application Price that was made available to Substantial Shareholders under the Substantial Shareholder Offer. Eligible Shareholders have the right to subscribe for less than their pro-rata allocation should they wish to do so. However, if Eligible Shareholders take up their full Entitlement under the Retail Offer then their relative interest in the Company will be unchanged.
If Eligible Shareholders elect not to take up all of their Entitlements, then the Entitlements not taken up will not be tradeable on the NZSX but instead will be offered to Selected Investors (together with the Entitlements not taken up by Substantial Shareholders and the Entitlements which would otherwise have been available to Ineligible Shareholders) via a single Bookbuild process after the close of the Retail Offer. Any Premium over the Application Price of NZ60 cents per New Share that may be achieved under the Bookbuild will be paid in cash to such Shareholders. It is expected that the Bookbuild will be completed by 30 March 2010.
The Board considers the Offer structure to be more favourable to Retail Shareholders than a traditional rights issue. As a result of the accelerated nature of the Substantial Shareholder Offer, before they are even required to make a decision to take up their Entitlements, Eligible Retail Shareholders already know that Rubicon has received commitments from its Substantial Shareholders, Board and management representing over 70% of the Company's total shareholder base. In addition, Shareholders who do not, or are ineligible to, take up their Entitlements will not be required to pay any brokerage or incur other transaction costs in order for their Entitlements to be offered under the Bookbuild.
Following the successful completion of the Offer and establishment of the new US$15 million bank financing facility, the Company will be in a much stronger position to bring value to its two core investments - ArborGen and Tenon.
Yours faithfully
Stephen Kasnet
Chairman
Retail Offer timetable
Record Date for determining Entitlements for Retail Offer
5.00 p.m., 5 March 2010
Shares quoted ex-entitlements on the NZSX
8 March 2010
Entitlement and Acceptance Forms (together with Offer Document) mailed to Shareholders
By 8 March 2010
Retail Offer opens
8 March 2010
Closing Date for receipt of Acceptance Forms (together with Application Monies)
5.00 p.m., 24 March 2010
Bookbuild
Completed by 30 March 2010
Allotment of New Shares under the Offer and Bookbuild
By 31 March 2010
New Shares expected to commence trading on NZSX
1 April 2010
Mailing of Securities Transaction Statements
By 9 April 2010
These dates are subject to change, are indicative only, and are also subject to the requirements of the Securities Act and NZSX Listing Rules, and may be amended by Rubicon. In its absolute discretion Rubicon may also withdraw the Retail Offer, the Bookbuild and/or the issue of New Shares at any time before the date of allotment.
END
To view the RUBICON RETAIL OFFER DOCUMENT - click here .
To view the RUBICON ENTITLEMENT AND ACCEPTANCE FORM - click here .
