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Basch Report
Jax Daily Record Monday, Feb. 26, 201806:20 AM EST

Rayonier AM gives seat to hedge fund

Agreement prevents Marcato proxy fight.
by: Mark Basch Contributing Writer

With an activist hedge fund apparently taking aim at Rayonier Advanced Materials Inc., the Jacksonville-based cellulose specialty products maker gave the fund a seat on its board of directors.

Matthew Hepler

Rayonier AM last week announced the appointment of Matthew Hepler, partner at Marcato Capital Management L.P., as a director, increasing the size of its board to 10 members.

As the company appointed Hepler, it also reached a standstill agreement with Marcato that prohibits the firm from soliciting any proxies regarding Rayonier AM.

That’s significant because Marcato has been engaged in proxy fights with several companies. For example, in the past year it has nominated its own directors for board seats at Buffalo Wild Wings Inc. and Deckers Outdoor Corp. 

It successfully elected three directors at Buffalo Wild Wings but its slate was defeated at Deckers.

According to quarterly Securities and Exchange Commission filings, Marcato began buying shares of Rayonier AM last summer and had 792,000 shares as of Dec. 31.

Julie Dill

That’s less than 2 percent of Rayonier AM’s outstanding shares, below the 5 percent threshold required for investors to file specific ownership forms for a company. So, Marcato has not publicly stated its intentions for Rayonier AM.

The provisions of Marcato’s standstill agreement include a clause that prevents it from acquiring more than 7.5 percent of Rayonier AM’s stock, and another clause that it will support any directors nominated by Rayonier AM’s board.

In addition to Hepler’s appointment, Rayonier AM also said its board is nominating Julie Dill for election to fill the board seat of retiring director Ronald Townsend.

Dill most recently was chief communications officer for Spectra Energy Corp.

Rayonier AM beats earnings forecasts

Along with announcing new directors, Rayonier AM reported fourth-quarter earnings well above analysts’ forecasts, helped by its November acquisition of Tembec Inc.

Rayonier AM reported fourth-quarter adjusted earnings of 50 cents a share, up from 18 cents the previous year, after the acquisition that more than doubles its revenue.

Paul Boynton

“The actions we’ve taken over the past three years to reduce costs and increase our financial flexibility positioned us well for the acquisition of Tembec. The skills that we learned in the process gives us great confidence in our team’s ability to drive additional value across a large organization,” CEO Paul Boynton said in the company’s conference call with analysts.

Vertical Research Partners analyst Chip Dillon said in a report that Tembec’s contribution to the company’s fourth-quarter earnings was 21 cents higher than he had forecast. However, earnings from Rayonier AM’s pre-merger operations were 10 cents below his forecast.

Dillon expects that trend to continue, as Rayonier AM deals with price declines in its cellulose specialties products business.

“Basically, we are taking down our expectations for the legacy Rayonier AM business given the magnitude of the average-price decline expected by management for 2018 — with some offset from higher expectations for the Tembec business — though we note that the rising Canadian dollar could impact the Tembec contribution more than we are anticipating,” he said.

Tembec was based in Montreal and the acquisition gives Rayonier AM facilities in 12 Canadian cities.

Dillon maintained his “hold” rating on the stock but D.A. Davidson analyst Steven Chercover is more optimistic, maintaining a “buy” rating.

“Rayonier AM looks poised to generate significantly improved profitability and free cash flow in fiscal 2018,” Chercover said in his report.

“In addition to being highly accretive, we believe the Tembec acquisition ‘de-risks’ Rayonier AM,” he said, as the deal expands its product base and geographic reach.

Rayonier AM’s stock jumped as much as $2.81 to $20.99 Tuesday after the earnings report, equaling a three-year high.

ACFC-Ameris vote set for March 21

Atlantic Coast Financial Corp. scheduled a special shareholders meeting for March 21 to vote on its proposed buyout by Ameris Bancorp.

The buyout of Atlantic Coast Financial will leave Jacksonville with no remaining publicly traded banking company headquarters. Ameris has its executive offices in Jacksonville but is officially headquartered in Moultrie, Georgia.

Two other publicly traded banking companies based in Jacksonville, EverBank Financial Corp. and FirstAtlantic Holdings Inc., have been bought out in the past year.

According to Atlantic Coast Financial’s proxy statement for the shareholders meeting, the company had begun considering merger opportunities in October 2016 and was seeking a “merger of equals” transaction, but no potential partners were interested.

The company began looking at the possibility of a buyout in December 2016. CEO John Stephens talked to representatives of several institutions at a Florida Bankers Association conference in June 2017, including Ameris.

A month later, Ameris indicated it was interested in an acquisition and negotiations began.

According to the agreement signed in November, Ameris will buy Atlantic Coast Financial for a combination of cash and stock valued at $161 million.

CBC shareholders approve deal

Shareholders of Coastal Banking Company Inc., parent of CBC National Bank, approved its buyout agreement last week with Lake City-based First Federal Bancorp Inc.

Coastal is headquartered in South Carolina but its CBC bank subsidiary is based in Fernandina Beach.

CBC has two branches in Nassau County, three in Marion County and one in Sumter County. It also has three branches in South Carolina. 

First Federal has 17 Florida branches, including two in Nassau County and one in Baker County.

The $83.2 million buyout is expected to be completed in the second quarter.

Vanguard now largest Regency shareholder

According to a recent SEC filing, mutual fund company Vanguard Group is now Regency Centers Corp.’s largest stockholder with 26.88 million shares, or 15.8 percent of the stock.

Israel-based Gazit-Globe Ltd., which like Regency develops shopping centers anchored by supermarkets, had been the largest stockholder, but it has been reducing its stake.

Gazit-Globe was the largest stockholder of Equity One Inc. and became Regency’s largest shareholder last year after Jacksonville-based Regency bought Equity One.

Gazit-Globe announced last week that it sold an additional 1.7 million shares of Regency and now has about 16 million shares, or 9.3 percent of the stock.

Earlier this month, Gazit-Globe CEO Chaim Katzman resigned as vice chairman of Regency’s board of directors to spend more time focusing on his company.

Titanic artifact case headed for mediation

U.S. Bankruptcy Judge Paul Glenn last week approved a motion that will send the Chapter 11 case of Premier Exhibitions Inc. to mediation.

Premier, owner of 5,500 artifacts from the RMS Titanic, had been hoping to auction off its assets this month, but the auction was canceled.

Premier is a publicly traded company headquartered in Atlanta, but it filed for Chapter 11 reorganization in June 2016 in Jacksonville because the company and some of its subsidiaries are incorporated in Florida.

According to a news release by the equity committee in the case, Premier’s exclusive right to file a reorganization plan expired Feb. 14.

“Rather than file competing plans, the parties have agreed to seek a consensual path to conclude this Chapter 11 case. The equity committee believes that mediation will help avoid a prolonged and expensive confirmation battle and currently presents the best opportunity to reach consensus among the parties for a path for Premier to exit Chapter 11 expeditiously while also maximizing recovery for equity holders,” it said.

Premier produces exhibitions of Titanic artifacts and other historical items, such as King Tut’s tomb.

The company’s stock continues to trade on the OTCQB Venture Market as it goes through Chapter 11.

The mediation is scheduled for this week in Atlanta.

Medtronic ENT revenue rises

Medtronic plc last week said its Jacksonville division, which produces surgical instruments for ear, nose and throat physicians, grew revenue by a high single-digit percentage in the third quarter ended Jan. 26.

The company does not give exact data for that business but said its specialty therapies group, which includes the ENT division, increased revenue by 8 percent to $398 million.

Medtronic’s global revenue rose by 1 percent in the quarter to $7.4 billion, and its adjusted earnings rose 12 percent to $1.17 a share.

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