Listed investment company Hamilton Securities has outlined its plans to gain control of 15 sandalwood forestry schemes in Western Australia's Ord River region that are currently being managed by Elders Forestry.
Hamilton director Giles Craig told InvestorDaily his group is proposing a new structure whereby growers would swap their interests in the schemes for shares in Hamilton, which would then move from a listing on the National Stock Exchange of Australia (an exchange focussing on technology companies) to the Australian Securities Exchange.
Mr Hamilton said growers currently have a "gun to the head" to sell out of the schemes to an offshore party, Santanol, which is looking to acquire the assets in a $70 million deal.
Under Hamilton's proposed arrangement, the LIC would assume control of the assets and take 10 per cent of the resulting upside, with the remaining 90 per cent going to shareholders.
Appropriately qualified growers would also be encouraged to put themselves forward for director roles with Hamilton, he added.
"We're trying to create a listed company run by growers, containing growers interests; we'll put forth a board, get rid of the RE [responsible entity], and run it as it should have been run - as a proper company managing sandalwood interests," he said.
There is a shareholder vote on March 14 (with proxies due by March 12) on the 15 schemes, and each one has two resolutions, he said. The first resolution, requiring 50 per cent of the vote, is to sell the schemes to the overseas buyer.
The second, requiring 75 per cent of the vote, would change the constitution and allow Elders to take $21 million of the $70 million in proceeds, Mr Craig said. Voters may be tempted to take the cash while it is on offer but it would be a suboptimal deal, he said.
If the second resolution to change the constitution does not pass that would mean Hamilton would then enter negotiations with Elders, he said.
In the event that Hamilton makes a firm proposal to growers, the Samuel Terry Fund has indicated its intention to underwrite a rights issue to raise approximately $1 million at $1 per share (and attaching option) to meet transaction and implementation costs, Hamilton said in a statement.
Hamilton said it is also currently in discussions with a "significant investor" about a placement of shares at $1 each to cover working capital requirements.
The Sandalwood assets are not expected to generate any revenue until at least 2017 when the first harvest is anticipated, according to Hamilton.
Elders Forestry has been approached for comment.
