POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP Item 8.01 Other Events
As previously disclosed, onJanuary 14, 2020 ,Pope Resources , aDelaware limited partnership ("Pope" or the "Company"), entered into an Agreement and Plan of Merger, as amended by Amendment No. 1, dated as ofApril 1, 2020 (as amended and as may be further amended from time to time, the "Merger Agreement") by and among Rayonier Inc. ("Rayonier"),Rayonier, L.P. , ("Opco"),Rayonier Operating Company LLC ("ROC"),Rayonier Operating Company Holdings, LLC ,Pacific GP Merger Sub I, LLC ("Merger Sub 1"),Pacific GP Merger Sub II, LLC ("Merger Sub 2"),Pacific LP Merger Sub III, LLC ("Merger Sub 3"), Pope,Pope MGP, Inc. ("MGP") andPope EGP, Inc ("EGP"). Pursuant to the Merger Agreement, Merger Sub 3 will merge with and into Pope, with Pope surviving such merger as an indirect wholly owned subsidiary of Opco (such transaction, the "Merger"). In connection with the proposed Merger, onApril 6, 2020 Rayonier, Opco and Pope filed a proxy statement/prospectus (the "Proxy Statement/Prospectus"), which Proxy Statement/Prospectus was mailed on or aboutApril 6, 2020 to Pope unitholders of record as ofMarch 30, 2020 . Four lawsuits challenging disclosures made in the Proxy Statement/Prospectus have been filed as of the date of this Current Report on Form 8-K. OnMarch 19, 2020 , a purported Pope unitholder filed a lawsuit against Pope and its board of directors alleging that, among other things, the Proxy Statement/Prospectus contained materially incomplete and misleading information in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The plaintiff seeks, among other things, to enjoin the proposed Merger, an award of rescissory damages and plaintiffs' costs, including attorneys' fees. This lawsuit is captioned Stein v.Pope Resources , et al., No. 1:20-CV-00387, and is pending in theUnited States District Court for the District of Delaware . OnMarch 26, 2020 , a purported Pope unitholder filed a putative class action purportedly on behalf of the unitholders of Pope against Pope, its board of directors, Rayonier, ROC, Merger Sub 1, Merger Sub 2, Merger Sub 3, MGP and EGP alleging that, among other things, the Proxy Statement/Prospectus contained materially incomplete and misleading information in violation of Sections 14(a) and 20(a) of the Exchange Act. The plaintiff seeks, among other things, to enjoin the proposed Merger, an award of rescissory damages and plaintiffs' costs, including attorneys' fees. This lawsuit is captioned Thompson v.Pope Resources , et al., No. 1:20-CV-00432, and is also pending in theUnited States District Court for the District of Delaware . OnApril 14, 2020 , a purported Pope unitholder filed a putative class action purportedly on behalf of the unitholders of Pope against Pope, its board of directors and Rayonier alleging, among other things, that members of the Pope board of directors breached their duty of loyalty under the Pope limited partnership agreement andDelaware law in connection with entering into the Merger Agreement, that Rayonier aided and abetted such breach and that the Proxy Statement/Prospectus misrepresents or omits material information. The plaintiff seeks, among other things, to enjoin the proposed Merger, an award of compensatory and/or rescissory damages and plaintiffs' costs, including attorneys' fees. This lawsuit is captioned Laidlaw v.Pope Resources , et al., No. 20-2-00755-18, and is pending in theSuperior Court of the State of Washington in and forKitsap County . OnApril 17, 2020 , another purported Pope unitholder filed a lawsuit against Pope and its board of directors alleging that, among other things, the Proxy Statement/Prospectus contained false and misleading information in violation of Sections 14(a) and 20(a) of the Exchange Act. The plaintiff seeks, among other things, to enjoin the proposed Merger, an award of rescissory damages and plaintiff's costs, including attorneys' fees. This lawsuit is captioned Arzonetti v.Pope Resources , et al., No. 1:20-cv-03102, and is pending in theUnited States District Court for the Southern District of New York . Pope believes that the claims asserted in the complaints are without merit and supplemental disclosures are not required or necessary under applicable laws. However, in order to avoid the risk of the lawsuits delaying or otherwise adversely affecting the Merger and to minimize the costs, risks and uncertainties inherent in defending the lawsuits, and without admitting any liability or wrongdoing, Pope is voluntarily supplementing the Proxy Statement/Prospectus as described in this Current Report on Form 8-K. Each of the plaintiffs has agreed that, following the filing of this Current Report on Form 8-K, they will dismiss their respective actions in their entirety, with prejudice as to the named plaintiffs. These additional disclosures in this Current Report on Form 8-K supplement the disclosures contained in the Proxy Statement/Prospectus and should be read in conjunction with the disclosures contained in the Proxy Statement/Prospectus, which in turn should be read in its entirety. To the extent that information in this Current Report on Form 8-K differs from or updates information contained in the Proxy Statement/Prospectus, the information in this Current Report on Form 8-K shall supersede or supplement the information in the Proxy Statement/Prospectus. In addition, these supplemental disclosures will not affect the merger consideration to be received by Pope unitholders in connection with the Merger or the timing of the special meeting of Pope unitholders scheduled forMay 5, 2020 , at11:00 a.m. Pacific Daylight Time , at the offices ofDavis Wright Tremaine LLP , 920 Fifth Avenue Suite 3300,Seattle, Washington 98104, as described further in the Proxy Statement/Prospectus.
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Capitalized terms used herein, but not otherwise defined, shall have the meanings ascribed to such terms in the Proxy Statement/Prospectus. Where additional disclosures are provided, it is indicated by underlined text, and where disclosures are deleted, it is indicated by a strike through.
Supplements to Proxy Statement/Prospectus
The disclosure in the section entitled "Background of the Merger" is hereby supplemented by adding the following disclosure to the end of the first full paragraph on page 68 of the Proxy Statement/Prospectus:
From the date of the Pope special committee's establishment onJuly 23, 2019 to the signing of the merger agreement with Rayonier onJanuary 14, 2020 , the Pope special committee held more than fifty meetings. Representatives of Centerview andMunger Tolles attended each of these meetings. With the assistance of its advisors, at these meetings the Pope special committee managed the transaction process, approved the solicitation of bids from seven new potential counterparties (both financial and strategic) in addition to the seven potential counterparties with whom contact was originally approved by the Pope board, oversaw the strategy with respect to negotiations with the various potential acquirers and with the GP shareholders, regularly received reports on the status of such negotiations, and instructed Centerview andMunger Tolles to take actions in respect of these matters, all with the goal of determining whether a value maximizing transaction for the unaffiliated Pope unitholders could be obtained on terms supported by the Pope special committee. Of the fourteen potential counterparties contacted, ten were potential financial acquirers and four were potential strategic acquirers. The seven new potential counterparties were selected based on criteria similar to the criteria used to select the parties with whom contact was originally approved by the Pope board, including the likelihood that such parties had a strategic interest in timber assets, the financial capability to complete a transaction at a price that would maximize unitholder value and experience in acquiring public companies. The following description in the section titled "Opinion of the Pope Special Committee's Financial Advisor" on page 98 of the Proxy Statement/Prospectus is hereby revised as follows:
• certain publicly available research analyst reports for Pope and Rayonier;
The disclosure under the subheading "Public Company Analysis" under the heading "Pope Financial Analyses" is hereby supplemented by adding the following disclosure into the third full paragraph on page 101 of the Proxy Statement/Prospectus:
Using publicly available information obtained fromSEC filings and other data sources as ofJanuary 10, 2020 , Centerview reviewed, among other things, the enterprise values, calculated as equity value plus net debt (debt less cash and equivalents) and plus non-controlling interest, as a multiple of estimated 2020 EBITDA for each of the companies. For Pope, Centerview calculated metrics on a partnership basis. The individual multiples and metrics for the selected companies and for Pope that were considered in this analysis are summarized as follows: Selected Public Company Analysis ($ in millions, except per unit/share data) Rayonier, CatchMark Timber Pope Inc. Trust, Inc. Resources Equity Value$4,202 $527 $307 Debt 975 459 93 Cash and Equivalents (57) (17) (1) Plus: Net Debt 918 441 92 Plus: NCI 91 - - Enterprise Value$5,210 $969 $399 2020E EV/EBITDA 19.7x 17.6x 16.1x
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The disclosure under the subheading "Precedent Transaction Analysis" under the heading "Pope Financial Analyses" is hereby supplemented by adding the following disclosure into the table on pages 101-102 of the Proxy Statement/Prospectus: Year Acquiror Property Seller $ / Acre 2019 ORM Timber Fund IV Beacon Rock Weyerhaeuser$2,844 2018 Weyerhaeuser Trask Hancock Timber Resource Group 4,650 2018 Greenwood Resources North Nestucca Hancock Timber Resource Group 4,787 2018 CatchMark Bandon Forest Investment Associates 4,894 2018 ORM Timber Fund IV Issaquah Hancock Timber Resource Group 3,443 2018 Hampton Affiliates Pinchot South Hancock Timber Resource Group 4,507 2018 ORM Timber Fund IV Pinchot North Hancock Timber Resource Group 4,763 2017 BTG Tilton Forest Investment Associates 3,626 2017 Hampton Affiliates Tahoma Hancock Timber Resource Group 5,199 2017 Greenwood Resources Elkhorn Hancock Timber Resource Group 2,940 2017 Greenwood Resources Rockaway ORM Timber Fund II 4,108 2016 Campbell Global Rosboro Rosboro 3,656 2016 Sierra Pacific Industries Wallace Falls Campbell Global 4,493 2016 Greenwood Resources Willapa Hancock Timber Resource Group 3,735 2016 Pope Resources Carbon River Hancock Timber Resource Group 4,356 2016 Forest Investment Associates Menasha Campbell Global 4,180 2016 Rayonier Menasha Campbell Global 4,311 The disclosure under the heading "Discounted Cash Flow Analysis" in the section entitled "Opinion of the Pope Special Committee's Financial Advisor" is hereby supplemented by adding the following disclosure into third full paragraph on page 102 of the Proxy Statement/Prospectus: In performing this analysis, Centerview calculated a range of illustrative equity values for the Company by (a) discounting to present value as ofSeptember 30, 2019 using discount rates ranging from 6.7% to 8.8% reflecting Centerview's analysis of the Company's weighted average cost of capital and the mid-year convention: (i) the forecasted after-tax unlevered free cash flows of Pope over the period beginningOctober 1, 2019 and ending onDecember 31, 2037 and (ii) a range setof illustrative terminal values of Pope calculated by Centerview applying perpetuity growth rates ranging from 2.1% to 2.5% to Pope's after-tax unlevered free cash flows for the terminal year (as set forth in the Pope forecasts) and (b) subtracting from the foregoing results Pope's net debt of$91.9 million as ofSeptember 30, 2019 , as set forth in the Pope forecasts. Centerview divided the result of the foregoing calculations by 4.355 million (the number of fully-diluted outstanding Pope units as ofDecember 31, 2019 based on the most recently available information that is set forth in Pope Internal Data) to derive a range of approximate implied values per Pope unit of$65.80 to$105.80 per Pope unit. Centerview compared this range to the$126.44 implied merger consideration. The disclosure under the heading "General" in the section entitled "Opinion of the Pope Special Committee's Financial Advisor" is hereby supplemented by adding the following disclosure into third full paragraph on page 103 of the Proxy Statement/Prospectus: Centerview is a securities firm engaged directly and through affiliates and related persons in a number of investment banking, financial advisory and merchant banking activities. In the two years prior to the date of its written opinion, Centerview has been engaged to provide financial advisory services to the Pope board, including in connection with certain strategic matters, and has received compensation amounting to a total of$1,125,000 from Pope for such services. In the two years prior to the date of its written opinion, Centerview has not been engaged to provide financial advisory or other services to Rayonier and has not received any compensation from Rayonier during such period. Centerview may provide investment banking and other services to or with respect to Pope or Rayonier or their respective affiliates in the future, for which it may receive compensation. Certain (i) of Centerview's and its affiliates' directors, officers, members and employees, or family members of such persons, -------------------------------------------------------------------------------- (ii) of Centerview's affiliates or related investment funds and (iii) investment funds or other persons in which any of the foregoing may have financial interests or with which they may co-invest, may at any time acquire, hold, sell or trade, in debt, equity and other securities or financial instruments (including derivatives, bank loans or other obligations) of, or investments in, Pope, Rayonier, or any of their respective affiliates, or any other party that may be involved in the transaction. The disclosure in the section entitled "Certain Unaudited Prospective Financial Information" is hereby supplemented by adding the following disclosure into the first paragraph on page 104 of the Proxy Statement/Prospectus: The Pope forecasts were not prepared with a view toward public disclosure or toward complying withU.S. generally accepted accounting principles ("GAAP"), nor were they prepared with a view toward compliance with the published guidelines of theSEC , or the guidelines established by theAmerican Institute of Certified Public Accountants for preparation and presentation of projections of prospective financial information. Pope uses certain financial measures in the Pope forecasts that are not in accordance with GAAP as supplemental measures to evaluate operational performance. While Pope believes that non-GAAP financial measures provide useful supplemental information, there are limitations associated with the use of non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with GAAP. The non-GAAP financial measures used in the Pope forecasts were approved by the Pope special committee for Centerview's use in connection with its opinion and were relied upon by the Pope special committee in connection with its consideration of the merger. TheSEC rules, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure, do not apply to non-GAAP financial measures provided to a board of directors or a financial advisor (like the Pope forecasts) in connection with a proposed transaction like the merger if the disclosure is included in a document like this proxy statement/prospectus. In addition, reconciliations of non-GAAP financial measures to a GAAP financial measure were not relied upon by Centerview for purposes of its opinion or by the Pope special committee in connection with its consideration of the merger. Pope has not historically provided reconciliations of forward-looking non-GAAP financial measures to GAAP financial measures because management cannot reliably predict all of the information necessary to prepare such reconciliations. Accordingly, the Pope has not provided a reconciliation of the financial measures included in the Pope forecasts to the relevant GAAP financial measures. In addition, the Pope forecasts were not prepared with a view towards complying with GAAP, nor were they prepared with the assistance of or reviewed, compiled or examined by independent accountants. The Pope forecasts may differ from published analyst estimates and forecasts and do not take into account any events or circumstances after the date they were prepared, including the announcement of the entry into the merger agreement. The disclosure in the section entitled "Certain Unaudited Prospective Financial Information" is hereby supplemented by replacing the table on page 106 of the Proxy Statement/Prospectus with the following disclosure: Fiscal Year ended December 31 (in millions, except per share
amounts, and all amounts in USD)
2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E 2035E 2036E 2037E
Consolidated Whole Company
Adjusted EBITDA(1) $ 20.2 $ 28.5 $ 26.4 $ 23.3 $ 36.7 $ 32.0 $ 30.1 $ 30.7 $ 30.4 $ 27.7 $ 27.7 $ 29.3 $ 32.0 $ 30.7 $ 31.9 $ 30.5 $ 33.4 $ 33.5 $ 32.0
Less: Taxes (0.1 ) (0.2 ) (0.2 ) (0.3 ) (0.4 ) (0.6 ) (0.7 ) (0.5 ) (0.6 ) (0.7 ) (0.8 ) (0.8 ) (0.8 ) (0.7 ) (0.7 ) (0.7 ) (0.7 ) (0.5 ) (0.4 )
Less: Capex (1.8 ) (1.1 ) (1.0 ) (1.1 ) (1.1 ) (1.7 ) (1.9 ) (1.4 ) (1.4 ) (1.9 ) (1.7 ) (1.8 ) (1.6 ) (2.3 ) (2.1 ) (2.0 ) (2.5 ) (2.5 ) (2.1 )
Less: Real estate development
capital (3.6 ) (6.6 ) (3.7 ) (12.6 ) (14.3 ) (8.7 ) (7.7 ) (7.7 ) (0.7 ) (0.6 ) (0.4 ) (0.4 ) (0.3 ) -
- - - - -
Less: Timberland acquisitions (0.8 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) (3.0 ) - Plus: Non-cash cost of land sold 9.2 6.7 3.7 12.7 14.4 8.7 7.7 7.8 0.7 0.6 0.5 0.4 0.3 -
- - - - -
Change in
- - - - - - - - - - - -
Plus: Funds Business (1.2 ) (0.4 ) 29.1
(1.6 ) (1.9 ) (2.1 ) (1.9 ) 9.6 (2.5 ) (2.3 ) 2.1 2.5 2.8 2.6 3.2 2.9 3.2 36.3 2.3
Unlevered Free Cash Flow(2)
-------------------------------------------------------------------------------- The disclosure under the heading "Transaction Bonuses" in the section entitled "Interests of Pope's Directors and Executive Officers" is hereby supplemented by adding the following disclosure on page 131 of the Proxy Statement/Prospectus: The merger agreement permits, subject to certain limitations, Pope to grant cash transaction bonus awards to its employees, including the named executive officers, to be denominated as cash-settled restricted Pope units, with the total number of such awards not to exceed 10,000 such units. These transaction bonus awards will vest at the closing and be paid out in cash on or about the closing. As of the date of this proxy statement/prospectus, no determinations have been made as to whether any executive officer will receive any such award. The maximum amount of transaction bonus awards that may be paid to the named executive officers is described in the table under the heading " -Golden Parachute Compensation to Named Executive Officers", and prior to consummation of the merger, the Pope board of directors may grant additional transaction bonus awards to other employees of Pope to facilitate the retention of such employees and consummation of the merger.
Cautionary Statement Regarding Forward-Looking Information
In addition to historical information, this communication contains forward-looking statements within the meaning of applicable securities laws. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which Rayonier, Opco and Pope operate and beliefs of and assumptions made by Rayonier's management, Opco's management and Pope's management, involve uncertainties that could significantly affect the financial or operating results of Rayonier, Opco, Pope or the combined company. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "will," "should," "may," "projects," "could," "estimates" or variations of such words and other similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature, but not all forward-looking statements include such identifying words. Such forward-looking statements include, but are not limited to, projections of earnings, statements of plans for future operations or expected revenues, statements about the benefits of the proposed transaction involving Rayonier, Opco and Pope, including future financial and operating results, the combined company's plans, objectives, expectations and intentions. All statements that address operating performance, events or developments that Rayonier, Opco and Pope expect or anticipate will occur in the future, including statements relating to (i) benefits of the proposed transaction to stockholders, unitholders, employees and other constituents of the combined company, (ii) synergies and other cost savings as a result of completion of the proposed transaction, (iii) the expected timetable for completing the proposed transaction or integration of the two companies, (iv) general conditions in the geographic areas where Rayonier, Opco or Pope operate, (v) creating value for stockholders, (vi) changes in timber prices, (vii) changes in sales or contribution volume of developed properties and (viii) the availability of capital are each forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although Rayonier, Opco, and Pope believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, the parties can give no assurance that the parties' expectations will be attained and therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The following important factors, among others, could cause actual results or events to differ materially from those expressed in forward-looking statements that may have been made in this document: risks associated with achieving expected synergies and other costs savings; risks associated with the ability to complete the proposed transaction and the timing of the closing of the proposed transaction; the ability to successfully integrate the parties' operations and employees following the closing of the proposed transaction; the cyclical and competitive nature of the industries in which the parties' operate; fluctuations in demand for, or supply of, Rayonier's, Opco's or Pope's forest products and real estate offerings; entry of new competitors into Rayonier's, Opco's or Pope's markets; changes in global economic conditions and world events; fluctuations in demand for Rayonier's, Opco's or Pope's products inAsia , and especiallyChina ; various lawsuits relating to matters arising out of Rayonier's previously announced internal review and restatement of Rayonier's consolidated financial statements; the uncertainties of potential impacts of climate-related initiatives; the cost and availability of third party logging and trucking services; the geographic concentration of a significant portion of the combined company's timberland; the ability to identify, finance and complete timberland acquisitions; changes in environmental laws and regulations regarding timber harvesting, delineation of wetlands, and endangered species, that may restrict or adversely impact the ability to conduct business, or increase the cost of doing so; adverse weather conditions, natural disasters and other catastrophic events such as hurricanes, wind storms and wildfires, which can adversely affect timberlands and the production, distribution and availability of the products; interest rate and currency movements; Rayonier's, Opco's or Pope's capacity to incur additional debt; changes in tariffs, taxes or treaties relating to the import and export of timber products or the products of competitors; changes in key management and personnel; the ability to meet all necessary legal requirements for Rayonier to continue to qualify as a real estate investment trust and changes in tax laws that could adversely affect beneficial tax treatment; the cyclical nature of the real estate
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business generally; a delayed or weak recovery in the housing market; the lengthy, uncertain and costly process associated with the ownership, entitlement and development of real estate, especially inFlorida , which also may be affected by changes in law, policy and political factors beyond Rayonier's, Opco's or Pope's control; unexpected delays in the entry into or closing of real estate transactions; changes in environmental laws and regulations that may restrict or adversely impact the ability to sell or develop properties; the timing of construction and availability of public infrastructure; and the availability of financing for real estate development and mortgage loans; the effect of the COVID-19 pandemic and related economic consequences, including the potential effects of such events on the market for timber products and general economic and political conditions (including debt and equity capital markets); the potential impact of announcement of the proposed transaction or consummation of the proposed transaction on relationships, including with employees and customers; the unfavorable outcome of any legal proceedings that have been or may be instituted against Rayonier, Opco or Pope; the amount of the costs, fees, expenses and charges related to the proposed transaction and the actual terms of the financings that may be obtained in connection with the proposed transaction; those additional risks and factors discussed in reports filed with theSEC by Rayonier and Pope from time to time, including those discussed under the heading . . .
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