Rayonier Inc. RYN recently announced an agreement to sell the entities holding its entire 77% stake in the New Zealand joint venture (JV) to a special purpose vehicle formed by Ents LP, an investment fund managed by The Rohatyn Group (“TRG”) for $710 million. The transaction, subject to the receipt of regulatory approvals and the satisfaction of other closing conditions, is expected to close in 2025.

Rayonier’s exit from New Zealand will reduce the company’s exposure to log export markets and enable it to simplify and streamline its portfolio, financial reporting and overall value proposition. It will also allow the company to focus on core U.S. markets with favorable long-term growth prospects.

The transaction will position the New Zealand business to drive new growth as it benefits from TRG’s extensive experience managing similar assets in New Zealand and around the world.

Details of the Transaction

The sales price implies an enterprise value of $922 million for the New Zealand JV, which manages nearly 287,000 productive acres of timberlands as of Dec. 31, 2024.

Rayonier expects the transaction to be modestly accretive to pro forma CAD per share and reduce pro forma Net Debt to Adjusted EBITDA to nearly 0.3X, before factoring in any capital redeployment.

Rayonier intends to use the transaction proceeds to further reduce leverage, return capital to shareholders, reinvest in synergistic acquisitions, and/or fund other capital allocation priorities.

Post transaction, Rayonier anticipates paying a special dividend for 2025 between $1.00 to $1.40 per share, the details of which will be announced later in this year. This special dividend is projected to be paid in a combination of cash and shares.

Management Commentary

Per Mark McHugh, president and CEO of Rayonier, “Since introducing our asset disposition and capital structure realignment plan in November 2023, we have now completed or announced pending dispositions totaling $1.45 billion—significantly exceeding our original $1 billion target. The success of this plan has allowed us to significantly reduce leverage, return capital to shareholders, and generate CAD and NAV per share accretion while also leaving us better positioned to create long-term value for our shareholders going forward.”

Conclusion

As evidenced by Rayonier’s substantial dispositions completed in the last two years, this transaction is in line with the company’s previously stated goal of enhancing shareholder value by capitalizing on the disconnect between public and private timberland values and reducing leverage amid an elevated interest rate environment.

Shares of this Zacks Rank #3 (Hold) company have declined 4.8% over the past three months compared with the industry’s decline of 9.6%.

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Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Welltower WELL and Cousins Properties CUZ, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Welltower’s 2025 FFO per share is pegged at $4.89, which indicates year-over-year growth of 13.2%.

The Zacks Consensus Estimate for Cousins Properties’ full-year FFO per share is $2.76, which indicates an increase of 2.6% from the year-ago period.

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This article originally published on Zacks Investment Research (zacks.com).

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