KI Phoenix claims site’s owner faces $100m “black hole” if offer is rejected

Kangaroo Island Plantation Timbers (KIPT), which controls the land and most of the region’s plantations, has already rejected the offer from KI Phoenix, maintaining that forestry remains the “highest and best use” of the land.

But KI Phoenix, part-owned by agricultural investor AAG Investment Management, has stepped up its campaign to take over the land, questioning KIPT’s ability to fund major infrastructure needed to regenerate the site.

It claims the harvesting of fire-damaged trees, the replanting of new trees, a planned seaport at Smith Bay and a new pellet facility proposed at the disused Timber Creek sawmill site would together cost more tan $100m, with “no guaranteed offsetting net income for over a decade”.

“With only about $30m in the bank, how will they pay for it,” AAG Investment Management’s Marcus Elgin said.

“If KPT shareholders accept our $20m offer for the land, and if other assets in the business are sold for their book value and added to cash already in the bank, shareholders could be in possession of a cash box of $66m.”

KI Phoenix wants to convert the forestry site into farming land, claiming its plans are in the best interests of the local economy, community and environment.

The land is valued at close to $60m in KIPT’s books, but KI Phoenix argues that figure is inflated by an assumption the planned seaport would be approved and commissioned.

“Since 2017, KPT has used the possibility of a port to inflate its land value, and has failed to represent the financial sensitivity of a development approval denial in its corporate reporting or the ‘as is’ valuation of the land,” Mr Elgin said.

“Assuming the State Government will approve the port circumvents due process and places inappropriate pressure on the minister’s decision making.”

In rejecting the bid last week, KIPT managing director Keith Lamb described the offer as “opportunistic” and said forestry remained the best use for the land.

On Thursday he declined to respond to specific claims put forward by KI Phoenix to the media, claiming he had not spoken to the company since it lobbed its conditional offer last week.

“This is an unsolicited hostile approach by the counterparty that has no standing with the company,” he said.

“He’s welcome to buy shares just like anybody else is welcome to buy shares – but outside of that if he wants to have a conversation with me he can call me directly.”

Several community leaders on Kangaroo Island have backed plans to convert the burnt timber plantations to farming land, arguing it would boost the island’s economy, provide extra jobs and reduce the fire risk.

Mayor Michael Pengilly last week said if a land transfer came to fruition it would boost the island’s economy after decades of slow action to harvest and export the timber, describing the introduction of plantations as an “economic disaster”.

Mr Elgin said while he was disappointed by KIPT management’s response to last week’s offer, he remained hopeful that the board would put the proposal to shareholders.