Two Canadian pension funds have entered a definitive agreement to acquire Vancouver-based TimberWest Forest Corp. (TSX: TWF.UN) for $1.03 billion.
TimberWest announced this morning that BC Investment Management Corp. and Public Sector Pension Investment Board are set to acquire the timber and land management company for a purchase price equal to $6.48 per existing stapled unit – a 25% premium over the 20-day volume-weighted average price of the company’s stapled units for the period ending April 8.
“We believe this transaction provides significant value to TimberWest unitholders,” TimberWest chairman Edward Daughney said in a company statement. “BCIMC and PSP Investments are both leading Canadian pension plans well-positioned to support the long-term development of TimberWest’s exceptional timber and real estate assets and emerging new businesses.”
As part of the agreement, TimberWest has a 60-day “go-shop” period where it can solicit a superior deal. Neither pension fund can match a superior proposal made during this period. If TimberWest is successful in soliciting a superior proposal during the go-shop period, the company will pay the pension funds a break fee of approximately $18 million.
Company president Paul McElligott said that the “fairly lengthy” go-shop period, during which the pension funds can’t match a superior bid, is a source of comfort to his board.
“Our sense is that if there’s a superior bidder out there in terms of valuation, they have a wonderful opportunity to come in and do due diligence and table a superior bid,” he said.
But he added that the two pension funds are well-established, very well-financed, and well-aligned with TimberWest’s business.
“Our assets are trees and real estate – these are long-life assets and these pension plans are long-term patient capital,” he said.
At press time, TimberWest stock was up 22% to $6.63 from Friday’s close.