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Kangaroo Island Plantation Timbers board rejects $20 million offer for land as "substantially less than book value"

Last updated: 01:58 01 Apr 2021 BST, First published: 01:23 01 Apr 2021 BST

Kangaroo Island Plantation Timbers Ltd - Kangaroo Island Plantation Timbers board rejects $20 million offer for land
The company is focused on monetising its forest assets and preserving land value after the devastating fires of 2019-2020.

Kangaroo Island Plantation Timbers Ltd (ASX:KPT) board has considered and rejected a conditional offer made by KI Phoenix Pty Ltd to purchase the company's land assets on Kangaroo Island for $20 million.

The company considers that this offer is well below the book value of the land.

Managing director Keith Lamb said: “KPT periodically receives approaches from interested parties seeking to acquire land located in high rainfall productive regions such as ours on Kangaroo Island. 

“Following the bushfires of 2019-20, there was an increase in interest by those seeking to opportunistically acquire land at distressed prices. 

“These approaches were not fully formed and certainly not capable of acceptance by the board.” 

Land value at $59.28 million

Lamb said that while the company was open-minded to approaches it received, the board was squarely focused on maximising shareholder wealth and with this in mind, offers were considered on merit. 

He said: “The land value recorded on KPT’s balance sheet is $59.28 million, based on independent expert advice provided by leading rural valuers. 

“The latest valuation was set at June 2020, following the fires of 2019-20 and is benchmarked below equivalent land value on mainland South Australia. 

“Since June 2020 land values around the country have risen.

“The conditional offer made by KI Phoenix is substantially less than book value. 

“This demonstrates the bidder does not understand the value proposition available to the company, through salvaging its forest produce by careful extraction and clever marketing, and the consequential benefit for shareholders in preserving underlying land value.” 

Business recovery plan progresses

Forestry is the highest and best use of KPT land and complements agriculture in providing regional economic diversification to Kangaroo Island.

While KPT continues to promote its proposed Seaport at Smith Bay as an investment towards future prosperity, the company has achieved recent success in placing product with mainland sawmill customers, and developing new export markets, via existing facilities at Kingscote and Penneshaw.

Market conditions are favourable and KPT reports that feedback from customers has been positive, recognising the intrinsic value of the company’s products, despite the impact of fire on the forests from which they arise.

Looking forward

The company is well on its way to achieving its goal to monetise forest assets and preserve land value. 

Lamb said: “We have already started to re-establish the next forest crop.

“We have assembled a highly competent team with skills and experience in forest management, timber production and supply-chain logistics. 

“If KI Phoenix has access to skills and a strategy to complement our own, it is welcome to return with a proposition that recognises the full value of the land and the company strategy which will see the treecrop harvested while preserving land value.

“Our foremost motivation is to preserve and enhance shareholder wealth, not accept opportunistic offers for productive land.”

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