Midway Limited has signed an agreement to sell its existing 17,000 hectare plantation estate in south-west Victoria. MEAG, a wholly owned subsidiary of Munich Re, has established a special purpose vehicle (SPV) for a client, and the SPV will acquire the existing 17,000 hectare plantation estate from Midway for A$154.1 million.
As part of the transaction, the SPV has also committed to invest an additional A$200 million for land purchases for the development of new hardwood plantations in southwest Victoria over the next five years on land to be sourced by Midway Limited and managed by Midway Plantations Pty Ltd. The transaction is subject to and conditional upon approval by the Foreign Investment Review Board (FIRB).
The sale of the Midway plantation estate, and Midway’s receipt of the transaction proceeds, will settle in scheduled tranches as Midway unwinds its existing timber supply arrangements with Manulife Investment Management (the ‘Strategy’ financial liability on the Midway balance sheet). Subject to regulatory approvals, the first tranche is provisionally expected to settle in mid-2022 and the last in or around September 2024.
The use of the net proceeds of the transaction will be considered further and will include paying the existing contractual arrangements under the `Strategy’ financial liability, reduce bank debt, investment in growth initiatives and returns to shareholders. The allocation of sale proceeds will be determined by the Midway Board of Directors following the conclusion of subsequent stages of the current Strategic Review announced on 14 March 2022.
As part of the transaction, the SPV will engage Midway Plantations Pty Ltd to manage the combined assets under a long-term management agreement and supply Midway Limited with all hardwood log harvested from the combined estate under a long-term offtake agreement, each on arm’s length commercial terms.
Managing Director for Midway, Tony McKenna, said the sale of the existing plantation estate and the greenfield plantation development is an excellent outcome for Midway shareholders.
“Midway will realise more than book value from plantation assets. We will generate revenue from the management and offtake agreements and we will secure future additional volume for our processing operations at North Shore.
“When complete, the change in ownership and control of the plantation estate will simplify the Midway balance sheet and remove annual valuation changes in biological assets that have previously created volatility in the valuation of company held assets.
“The proceeds of the transaction and the ongoing management revenue will support our existing business and allow Midway to develop initiatives that will reposition the company for long-term growth.”
Holger Kerzel, member of MEAG’s Board of Management, stated that MEAG was very pleased to enter into a long-term commercial relationship with a significant Australian forestry company such as Midway.
“On behalf of our clients, MEAG identified the Australian hardwood production sector as a key growth opportunity in global forestry and Midway is one of the few companies that could create a platform for significant new commercial hardwood forestry investment that meets our criteria especially for sustainable investments”, Holger Kerzel said.
The Midway project team was led by the General Manager of Business Development, Mitch Morison and the General Manager, Plantations, Glen Samsa, and was advised by Azure Capital and SBA Law for this transaction.
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Forestry Australia, the peak organisation representing over 1,000 professional and scientific forest land managers and growers in Australia is celebrating the critical role of forests in sustainable production and consumption for Australians, and millions of people across the world.
As part of International Day of Forests, Forestry Australia is shining a light on the importance of forest science, and the skilled, experienced forest managers, growers and professionals who drive positive sustainable forest outcomes across the country. Rayna Barr, Midway Logistics Admin and Compliance Manager in Western Australia, said ensuring forests could be enjoyed by generations to come was an important outcome of active forest management.
“I have had a varied career in forestry, from native forest management in New Zealand, to pine log export in Western Australia and Safety and Environmental Compliance with Midway.
“Throughout this career I have learned that active management of forests provides us with an opportunity to improve forest health, ensuring that my children will be able to continue to use them and enjoy them in the future, just as we enjoy them now as a family.
“Managing forests to ensure they are resilient to fire, drought and disease, and open and available for the community to enjoy should be everyone’s goal.”
The United Nations General Assembly proclaimed 21 March the International Day of Forests (IDF) in 2012.
The Day celebrates and raises awareness of the importance of all types of forests, with this year’s theme “Forests and sustainable production and consumption”.