WILDLIGHT, Fla. (News release) -- Rayonier Inc. announced that the company has entered into two separate agreements to acquire approximately 172,400 acres of high-quality commercial timberlands located in Texas, Georgia, Alabama, and Louisiana for an aggregate purchase price of approximately $474 million from Manulife Investment Management, a leading timberland investment manager. The Acquisitions comprise well-stocked and highly productive timberlands located in some of the strongest timber markets in the U.S. South. Approximately 80% of the Acquisitions consist of fee ownership, and the remaining 20% consist of a long-term lease.
Key attributes of the Acquisitions include the following:
Enhances scale in strong markets - the Acquisitions are located across four of the strongest U.S. South timber markets (as measured by average composite stumpage price by region), with a weighted-average ranking of 4.9 out of 22 markets.(1) Pro forma for the Acquisitions, 72% of Rayonier's two million-acre U.S. South portfolio will be located in top quartile markets, reflecting a competitive and diverse customer mix, balanced timber inventories relative to demand, and strong pricing tension.
Highly productive timberlands - for the acquired fee lands, 72% are plantable with an average expressed site index of 73 feet. This translates to an expected sustainable yield* of approximately 670,000 tons per year, or 4.8 tons per acre per year.
Well-stocked timber inventory with mature age-class - the acquired fee lands contain 7.5 million tons of merchantable timber inventory,* or 54 tons per acre, 66% of which consists of higher-value grade products. Average plantation age of the acquired fee lands is 18 years.
Significant near-term harvest potential - based on the strong productivity, stocking, and age-class profile of the acquired fee lands, combined with the expected harvest from the leased lands, the Acquisitions are expected to generate an average annual harvest volume of approximately 860,000 tons over the next 10 years.
Complementary to existing landholdings - the Acquisitions offer an extraordinarily strong fit with our existing footprint across the U.S. South, which should provide for minimal execution risk and significant operational synergies.
Accretive to cash flow - average annual Adjusted EBITDA** contribution of approximately $25 million expected from timber operations over the next ten years, with additional upside potential from higher-and-better use real estate sales and natural climate solutions (which are not included in the projected financial contribution).
Significant upside / optionality - no wood supply agreements encumber the properties, thus enhancing operational flexibility. In addition, we believe portions of the Acquisitions are well-positioned to capitalize on emerging ecosystem services / natural climate solutions opportunities, including bioenergy, biofuels, and carbon capture and storage.
The Acquisitions are subject to customary closing conditions and expected to close in the fourth quarter of 2022. Rayonier expects to finance the Acquisitions with cash on hand and the proceeds from incremental borrowings through the Farm Credit System.
"The acquisitions announced today underscore our commitment to improving our portfolio quality and sustainable yield through disciplined growth," said David Nunes, President and CEO. "It is rare to come across a collection of premier quality timberland assets with such a strong fit to our existing portfolio. In addition to complementing our southern portfolio, we expect that these acquisitions will generate a strong cash yield from timber operations, which will enhance our cash flow profile, quality of earnings, and market positioning as the leading pure-play timberland REIT. In sum, we are thrilled to be adding these properties to our southern portfolio and look forward to managing them for long-term value creation."
(1) Based on TimberMart-South weighted average composite stumpage price by region assuming product mix of 50% pulpwood, 30% chip-n-saw and 20% sawtimber.
* References to "merchantable timber inventory" and "sustainable yield" are as defined in our most recent Annual Report on Form 10-K.
** "Adjusted EBITDA" is a non-GAAP financial measure. See "Non-GAAP Financial Measures" below. These targets are based on assumptions and are subject to significant uncertainties, many of which are outside of the company's control. While management believes these targets and the underlying assumptions are reasonable, they are not guarantees of future performance. Actual results will vary, and those variations may be material. Please consult the Forward-Looking Statements discussion below for some of the factors that may cause variations. Nothing herein is a representation by any person that these targets will be achieved, and the company undertakes no duty to update its targets.