Integrated Tree Cropping will be the second largest integrated hardwood timber company listed on the Australian Stock Exchange following completion of its acquisition of Victorian company Neville Smith Group.
It will rank behind Tasmanian company Gunns, which recently established a Western Australian presence by purchasing Wesfarmers’ Sotico timber business.
ITC announced last week that it had agreed to acquire the privately owned Neville Smith Group for $80 million.
The merger adds to a period of rapid growth for ITC, which is 51 per cent owned by diversified agribusiness company Futuris.
"The merger will transform ITC from a forestry manager into an integrated timber group engaged in the full spectrum of activities along the timber value chain, and an annual revenue of approximately $100 million," acting ITC chief executive Les Wozniczka said.
ITC already has about 100,000 hectares of plantations under management and intends to plant a further 16,000 hectares this year after raising $40 million from investors in managed investment schemes.
Its main competitors in the managed investment scheme sector include Gunns, which started life as a timber miller and diversified into plantations to help secure its long-term supplies.
Other big competitors are Perth-based Great Southern Plantations and Melbourne-based Timbercorp, which specialise in managing investment projects.
ITC is hoping to benefit from Neville Smith Group’s 80 years of experience in timber harvesting and processing.
"Access to this expertise will enhance ITC’s ability to extract maximum benefit from our plantations for our investors and our own shareholders," Mr Wozniczka said.
Specifically, ITC will be able to assess further processing and value adding opportunities rather than selling all of its hardwood plantation timber for woodchips.
In a related move last week, ITC spent $22 million acquiring a 19.9 per cent stake in Forest Enterprises Australia, which has plantation and timber milling activities in Tasmania.
FEA and NSG are joint venture partners in a woodchip processing and export facility at Bell Bay, Tasmania.
The vendors of Neville Smith Group will receive $40 million in cash and an equal amount in ITC scrip.
ITC is planning to issue a total of 100 million shares worth $120 million as part of the acquisition. This will allow it to pay for the acquisition through cash and shares and repay approximately $38 million of Neville Smith Group’s $39.5 million bank debt.
Futuris has committed to support the capital raisings to maintain its current shareholding level.
ITC has appointed Patersons Securities as lead manager and Bell Potter as co-manager of the capital raisings.
Neville Smith Group chief executive James Neville Smith will succeed Mr Wozniczka as ITC chief executive.
ITC has scheduled a shareholders’ meeting for September 8 to approve the transactions.
