Munich Re, through its asset management company, MEAG, has committed to invest A$354.1m (€234m) in Australian forestry assets through Midway, a listed Australian forestry manager and wood-fibre exporter.
Midway said MEAG had established a special purpose vehicle (SPV) to acquire the company’s existing 17,000-hectare plantation estate in Victoria for A$154.1m.
As part of the transaction, the SPV has committed to invest an additional A$200m for land purchases for the development of new hardwood plantations in southwest Victoria over the next five years.
Midway said it would source the land for the German investor and manage the plantations.
Holger Kerzel, a member of MEAG’s board of management, said: “On behalf of our clients, MEAG identified the Australian hardwood production sector as a key growth opportunity in global forestry.”
A spokesman for Midway told IPE Real Assets: “In the past, Midway has funded growth in plantations from its balance sheet, but that is becoming very expensive for a listed company.”
He explained that accounting treatment in Australia, where companies were required to have “biological revaluation” every six months, created a lot of volatility in the balance sheet and a company’s earnings profile.
“We have been looking to get our land and trees off our balance sheet, and we were looking for an external funder to help grow the plantation base in Victoria,” the spokesman said.
Tom McKenna, director for Midway, described the sale of the existing plantation estate and the greenfield plantation development as an excellent outcome for Midway shareholders.
“Midway will realise more than book value from plantation assets. We will generate revenue from the management and offtake agreements, and we will secure future additional volume for our processing operations,” McKenna said.
“The proceeds of the transaction and the ongoing management revenue will support our existing business and allow Midway to develop initiatives that will reposition the company for long-term growth.”
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