Tenon shareholders to vote on selling Taupo mill, winding up

Tenon director Mark Eglinton
TENadd to my Stocks

Tenon shareholders will today vote on whether to sell its Taupo wood processing mill to a consortium of US and New Zealand investors and wind up the business or hold on to the assets and continue as a NZX-listed company.

The Auckland-based company's independent directors, Mark Eglinton and Stephen Walker, led the meeting in Auckland today, with the rest of the board conflicted by virtue of their involvement with Tenon's controlling shareholder Rubicon, which is part of the consortium wanting to buy the mill for $US55 million. If approved, shareholders will vote on two capital returns expected to generate $2.12 a share for investors, whether to de-list from the NZX and changing the constitution to speed up the liquidation process.

"If shareholders approve the resolutions put to the meeting today, there can be no doubt that the strategic review will have delivered considerable value to our shareholders," director Eglinton said in speech notes published to the stock exchange. "More than $US125 million (including dividends) will have been returned to shareholders, which will equate to a total shareholder return in US dollars of approximately 50% since we started the strategic review process in 2015."

Shareholders approved the $US100 million sale of the US operations to New York-based buyout firm Blue Wolf Capital last November, allowing the company to make a $US71 million capital return via a share cancellation. The Rubicon-led purchase of the Clearwood mill in Taupo trumped seven other competing offers. If it doesn't get over the line, Tenon faces a $US1.65 million termination fee if it halts the sale plus costs for the bidding group of up to $US500,000.

Rubicon owns about 60% of Tenon and isn't allowed to vote on a component of the transaction to approve the related party transaction; neither can it vote on de-listing.

Tenon started turning a profit in 2014 after more than a decade of losses as the US home-building sector began to recover, supporting demand for its wood mouldings which it largely sold into the world's biggest economy via Home Depot outlets. The company looked at other ways to cash in on the US housing market, before attracting bidders when it ran the ruler over its businesses.

The shares last traded at $2.05 and have gained 7.5% over the past 12 months.


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The whole saga illustrates and continues to perpetuate the fat cat incompetent management mindset of the old Fletcher Challenge Group.

No other way to describe the drag out saga of realizing the remnants of that pathetically managed group under Hugh Fletcher - millions of dollars of directors and management fees paid to the fat cats with bugger all to show after nearly 2 decades after the Group was dismantled.

As for the research by Edison which valued Tenon at over $4.00 (http://www.edisoninvestmentresearch.com/research/company/tenon), nothing highlights the nonsense of a company initiated and paid for research!

Grant Samuel's independent valuation report of Tenon in Nov 2016 showed a 180% change in valuation of Clearwood - so much for 'independence'.

All in all, an ugly ugly blight reflecting how Tenon's minority shareholders have been fleeced over the last 17 years.

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