Tuesday, January 28, 2014

Seeking Alpha: Rayonier Switching It Up As Its Prospects Diverge

Just as some companies manage to build value through acquisitions where "1+1" equals more than two, investors apparently think that the two major halves of Rayonier (RYN) are worth more apart than together. Seeing as how there really never were the hoped-for synergies between the company's timber assets and its Performance Fibers business, the split likely won't do either much harm, and it does give investors the opportunity to invest in a much "purer" timber REIT after the split is finalized.

Together or apart, I think Rayonier is worth about $46 to $47 today on a sum-of-the-parts basis. With an EV/EBITDA approach using next year's expected EBITDA showing a fair value of only about $35, it's clear to me that much of the value proposition here depends upon a housing recovery in the U.S. driving improved demand for timber and higher valuations for timberlands. Assuming that debt would be apportioned proportionately (and factoring in some asynergies from duplicated corporate expenses), I would estimate that about one-third of the stock's value can be attributed to the Performance Fibers business today.

Follow this link for the full article:
Rayonier Switching It Up As Its Prospects Diverge

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