Stafford poised to deploy two-thirds of $612m fund after winning Phaunos battle

The secondaries firm expects to receive more acceptances of its hostile bid for the $259m timber vehicle after a majority of shareholders approved it last week.

Stafford Capital Partners is set to commit nearly two-thirds of its $612 million SIT VIII vehicle less than six months since its close after a majority of shareholders in Phaunos Timber accepted its hostile bid for the forestry fund.

The firm’s final offer, at $0.52 a share, values Phaunos at $259.1 million. The secondaries firm had until Saturday to gain approval from more than 50 percent of shareholders, per a self-imposed deadline it had announced on Tuesday. It confirmed having received acceptances accounting for 50.65 percent of Phaunos’s issued shares on Friday.

That announcement marked a victory for Stafford after a months-long battle to acquire the fund, with the board urging shareholders to reject the firm’s successive bids until the very end. Stephen Addicott, a partner at Stafford, told Agri Investor the firm expects to receive further acceptances in relatively short order.

Assuming a 100 percent take-up, he said, the firm will have deployed $406.1 million from SIT VIII, which reached its final close in May. That total would comprise the $259.1 million to be drawn down for Phaunos and $147 million already committed through previous transactions. These include six fund interests acquired through secondaries, one primary fund pledge and a single co-investment, Addicott said.

The last condition remaining for the transaction to proceed is a green light from New Zealand’s Overseas Investment Office, which Stafford expects to gain before the 19 October deadline. The offer will remain open for 14 days after that date.

Addicott said Phaunos’s current investors include small shareholders, wealth managers, pension funds and hedge funds, adding that acceptances had come from investors in each of these segments. He assumed a majority of shareholders had accepted the bid for a price that remained attractive despite the offer’s promised swiftness of execution and simplicity.

Phaunos is being wound up after shareholders decided against continuing it in June 2017, when Stafford was still the fund’s manager. A formal realisation process was initiated in August that year, but its 14 to 20 months projected time frame compared unfavourably with Stafford’s expected three to four months from acceptance to completion.

The bottom-end of the Phaunos board’s realisation range – $0.54 to $0.60 per share – was only 3.8 percent above Stafford’s final bid of $0.52, UK broker Numis Securities pointed out this morning. There also remained legal uncertainty over a dispute with Rayonier – the majority shareholder in Matariki Forestry Group, an asset accounting for 74 percent of Phaunos’s portfolio. That raised “serious concerns about the ability of the Phaunos board to deliver the realisation process,” Stafford argued this summer.

Addicott observed that the fund’s assets would be managed very much as they would had Stafford continued to manage Phaunos after June 2017, and that the firm would seek to initiate talks with Rayonier as soon as possible.