Research Desk Line-up: Rayonier Post Earnings Coverage
LONDON, UK / ACCESSWIRE / August 29, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for Deltic Timber Corp. (NYSE: DEL) ("Deltic"), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=DEL. A notification filed by Southeastern Asset Management, Inc. ("SAMI") with the US Securities and Exchange Commission (SEC) dated August 25, 2017, revealed that the private investment firm now has active stake in Deltic. As per the filing, SAMI owns 15% of the total shares of Deltic making it the largest shareholder of the latter company. For immediate access to our complimentary reports, including today's coverage, register for free now at:
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SAMI's rationale behind the move
In February 2017, SAMI had invested in Deltic and become the largest shareholder in Deltic. SAMI's contention is that since its investment in Deltic in February 2017, SAMI has been pursuing discussions with Deltic to explore strategic options including merging with or being acquired by a strategic partner with a view to unlocking value for the Company and shareholders. SAMI also entered into discussions with interested third parties to further explore the strategic options.
In this duration, Deltic even received an unsolicited proposal from a reputed industrial entity, which showed interest in acquiring the Company in an all-stock transaction. SAMI showed keen interest in the matter and was ready to sign an agreement with Deltic to enable the industrial party to evaluate the proposal. However, SAMI's contention is that Deltic was not serious about engaging with SAMI at a substantive level despite numerous attempts. Deltic even hired a financial advisor but refuses to enter into substantive negotiations with any potential partners, some who are willing to pay a price which is in excess of Deltic's current trading levels.
The situation has shaken SAMI's confidence in Deltic's Board and management, primarily because of their refusal to engage. SAMI now believes that it has wasted immense amount of time since it became the largest shareholder in Deltic in February 2017 and Deltic is attempting to lock up SAMI's investment in the Company for an inordinate amount of time in the future.
Additionally, Deltic's Board appointed John D. Enlow as the new CEO on February 27, 2017, disregarding SAMI's suggestion countering the decision. SAMI had suggested that the Company hire an industry veteran instead of a CEO as the CEO would have to be paid significant benefits and have the opportunity to misuse the Company's assets given the outreach from potential transaction counterparties. On the other hand, the industry veteran would bring with him superior, experienced corporate leadership and network of contacts which would eliminate the need to hire a CEO.
Deltic had appointed John Enlow after firing Kenneth Mann, the Company's CFO who was with the Company since 1991, for fraud and misappropriating certain Company assets for personal use. Commenting on Kenneth Mann's exit, Deltic's Board statement read:
"Mann's termination is not related to the Company's operating or financial performance and is not expected to have a material impact on Deltic's previously issued financial statements."
The Board's inability to spot fraud being conducted by the long-term CFO and the inability to put forth any strong reason as to why Deltic should continue functioning as a standalone company, further strengthens SAMI's uneasiness.
SAMI reiterates its belief that it had previously shared in February 2017, that the unsolicited proposal would be highly beneficial to Deltic's shareholders. Some of the compelling benefits include the following:
- significant synergies given that Deltic's current general and administrative expense (G&A) level is too large for its asset base;
- geographic diversity and with it greater harvest flexibility versus Deltic's current reliance on timberlands in Arkansas and Louisiana;
- the ability to improve operations at and potentially monetize Deltic's manufacturing assets;
- outside real estate development expertise for Deltic's under-monetized Higher and Better Use (HBU) acreage;
- superior, experienced corporate leadership;
- an efficient ability to convert from Deltic's current C-Corp structure to a REIT; and
- a dividend increase of over 5x from Deltic's current level
The purpose of the current filing it to show SAMI's support for the unsolicited proposal and to allow and motivate other Deltic's shareholders to come forth and share their views with Deltic's Board and Management to resolve the matter and the status quo. SAMI has also indicated that it may nominate directors to the Board during Deltic's annual meeting.
About Deltic Timber Corporation
El Dorado, Arkansas, based Deltic is a vertically integrated natural resources Company that is engaged in the growing and harvesting of timber and the manufacturing and marketing of lumber and medium density fibreboard (MDF) through its wholly owned subsidiary Del-Tin Fiber LLC. The Company owns 530,000 acres of timberland in Arkansas and North Louisiana, operated sawmills in Ola and Waldo, and is engaged in real estate development in Little Rock and Hot Springs.
About Southeastern Asset Management, Inc.
Memphis, Tennessee based SAMI is a privately owned, global investment management firm founded in 1975 by Mason Hawkins. It is also the investment advisor to the Longleaf Partners Funds. The firm invests in four major areas - US Large Cap, US Small Cap, Non-US, and Global for their institutional clients. Slightly more than half of the firm's total assets under management (AUM) are in separately managed accounts for institutional clients and the remaining AUM is invested in the Longleaf Partners Funds, a suite of mutual funds and UCITS funds.
The firm's total AUM as on June 30, 2017, was $19.8 billion. The firm has global offices in London UK; Singapore; and Sydney, Australia.
Last Close Stock Review
On Monday, August 28, 2017, the stock closed the trading session at $76.14, climbing 3.96% from its previous closing price of $73.24. A total volume of 99.92 thousand shares have exchanged hands, which was higher than the 3-month average volume of 38.67 thousand shares. Deltic Timber's stock price surged 10.72% in the last three months, 2.45% in the past six months, and 8.25% in the previous twelve months. The stock is trading at a PE ratio of 110.51 and has a dividend yield of 0.53%. At Monday's closing price, the stock's net capitalization stands at $860.38 million.
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