November 8, 2021

By Lynda Kiernan-Stone, Global AgInvesting Media

ArborGen, one of the world’s largest suppliers of eucalyptus and loblolly pine seedlings, has agreed to sell ArborGen ANZ, its Australian and New Zealand business unit, to Geyser Limited Partnership, a consortium of New Zealand investors led by Hugh Fletcher and predominantly consisting of charitable trusts and private families, for NZ$22.25 million (US$16 million). 

The decision to divest ArborGen ANZ, which is independently operational and significantly smaller than ArborGen’s U.S. business, was made following a complete review of the company conducted by PwC, announced this June.

Currently operating around its maximum combined productive capacity of approximately 30 million tree stocks per annum in New Zealand, and 5.5 million per annum in Australia, ArborGen ANZ is forecast to contribute approximately 15-plus percent of Group Revenue in FY2022, but has a lower growth profile compared to the group’s other markets.

Furthermore, expansion of capacity to grow the core forestry and horticulture businesses would require a significant capital spend, leading the board to decide that the proceeds from this sale would be better spent in higher growth markets in the U.S. and Brazil.

David Knott Jr., chairman of ArborGen, commented, “The sale of ArborGen ANZ will realize value for the relatively mature ANZ business and provides the company the flexibility to invest in expanding its high growth US and Brazilian businesses, explore investment in new growth opportunities in in vitro and carbon related segments and repay debt.”

 The company has a strategic eye set of growing the sales of its higher margin proprietary genetic products (Mass Control Pollinated (MCP) and Varietals) in the U.S., where there exists greater potential to drive advanced genetics adoptions and gain market share.

After decades of investment and effort to develop best-in-class proprietary MCP products, and benefiting from orchard expansions across the U.S. South while also upgrading both industrial and private landowning customers to MCP seedlings, ArborGen is on track to post its highest MCP sales year in the U.S. this year, with year-to-date orders currently at approximately 105 million seedlings – 25 million units higher than last year. 

This recognition, together with strong pulp and charcoal markets, have also positioned the company to benefit from capital deployment in Brazil.

Knott Jr. said, “While the Company continues to consider other options to unlock value for the benefit of all shareholders, the sale of ArborGen ANZ affords ArborGen great strategic and financial flexibility, creating a strong platform for the Company to pursue growth opportunities for the benefit of all shareholders, including acquisition opportunities.”

The transaction is slated to be complete on November 20, 2021, however, the deal is dependent on at least 75 percent of ArborGen’s permanent employees accepting employment with Geyer, and ArborGen New Zealand Unlimited transferring 2.34 percent shareholding in Radiata Pine Breeding Company Limited to Geyser. No other regulatory requirements have been placed on the deal.

– Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan-stone@globalaginvesting.com.