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Investor offer for Tenon's US business

NZN 29/08/2016 Pattrick Smellie

Taupo-based wood processor Tenon's US operations are under offer from a New York-based private equity firm for $US110 million ($NZ152m) that the company's directors say will allow a substantial capital return shareholders.

Shareholders will be asked to approve the deal in November, assuming no better offer appears and an independent assessment by investment bank Grant Samuel supports the deal.

An initial Grant Samuel valuation puts the value of Tenon's North American operations at between $US108m and $US129.5m, making the offer from Brooklyn-headquartered Blue Wolf Capital at the low end of the range.

The announcement coincides with an annual earnings showing Tenon's road to profitable recovery is becoming entrenched, with net profit after tax before the writedown and $3m in strategic review costs coming in at $21m for the year to June 30.

Earnings before interest, tax, depreciation and amortisation doubled to $26m before the costs noted above and a further $3m of restructuring and impairment costs.

The result was achieved on a 9 per cent uplift in revenues to $430m.

First listed on the NZX in 1996, Tenon pushed into the US market for high value wood moulding products in the mid-2000s, coinciding with the sub-prime mortgage and global financial crises.

Tenon shares bottomed out at 50 cents a share in December 2008 and closed on Monday at $2.52.

Blue Wolf's website reveals it is a private equity investor with multiple exposures in the healthcare and pharmaceuticals sectors, as well as holdings in various lumber, paper and wood manufacturing businesses.

Majority shareholder Rubicon has expressed no view on the offer, but said it concurred with the Tenon board's view that a capital return should be pursued even if the Blue Wolf offer did not proceed as the best use of surplus cash.

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