Tembec Jumps After Rayonier Advanced Wins Support for Higher BidBy
Two biggest Tembec investors support revised bid, Boynton says
Investors offered C$4.75 per share in cash, or Rayonier stock
Tembec climbed as much as 13 percent Monday to C$4.83 apiece in Toronto. Rayonier Advanced’s shares rose as much as 16 percent to $16.92 in New York.
Rayonier Advanced raised its bid for Tembec by 17 percent, according to a statement Sunday, winning support from investors that had said they wouldn’t back the deal without an increase. Rayonier Advanced is now offering Tembec investors the choice of receiving C$4.75 a share in cash -- valuing the company at about C$475 million ($379 million) -- or 0.2542 Rayonier Advanced shares for each Tembec share.
The revised terms represent a 61 percent premium over the closing price on May 24, the last day of trading before the original deal was announced.
Paul Boynton, chief executive officer of Rayonier Advanced, said in an interview Sunday that the companies have entered into an irrevocable agreement with Tembec’s two biggest shareholders, Oaktree Capital Group LLC and Restructuring Capital Associates to support the deal. The pair collectively hold about 37 percent of the target’s shares.
The deal came together after talks over the past week with Tembec’s dissenting shareholders, according to Boynton. He said he was confident the deal would pass with their support.
“They reached out to us at the end of last week, and we had some constructive and professional dialogue,” Boynton said. “It was a positive dialogue and, yes, we increased our offering.”
He said both shareholders liked the idea of the transaction but wanted more value for Tembec investors. “We spent the last two months integration planning with Tembec, and our perspective of the value we can trade here has only increased,” Boynton said.
“In consideration of the increased purchase price, we are pleased to support the combination of two leading and complementary businesses,” RCA said in a statement Monday.
“We appreciate the constructive engagement we have had with Rayonier Advanced Materials and are pleased that its board has responded with this higher offer price -- we now fully support the transaction,” said Patrick McCaney, managing director and portfolio manager for Oaktree’s Value Equity strategy.
Under the previous terms of the deal, Tembec shareholders could have received either 0.2302 Rayonier Advanced shares or C$4.05 in cash per share of Tembec. The amended bid, which has the unanimous support of Rayonier’s board, will go to a vote on July 27. It requires support from two-thirds of the Tembec investors who vote at the shareholder meeting.
Last week, Glass Lewis & Co. urged investors in Montreal-based Tembec to vote against the deal, saying the purchase price was too low. The shareholder advisory firm noted that there’s been a significant increase in Rayonier Advanced’s shares since the deal was announced, suggesting it’s underpaying and could afford to share more of the potential value with shareholders.
Rayonier Advanced agreed to buy Tembec for about C$405 million in May to extend its geographic reach and offer more products. Rayonier said the transaction would produce about $50 million in cost savings over three years, providing a boost for the Jacksonville, Florida-based company, which has struggled amid price declines and rising competition after it was spun off from Rayonier Inc. in 2014.