Tambourah Metals Ltd T.TMB.W

RE:RE:With a cool head

[Alphaseeker1984]

FarmInvestor4 - that is exactly the play if one believes that the combined entity will generate better returns than on a stand alone basis.    The premium gap between RYAM's share price and the conversion is likely to remain until the final days before closing, therefore if one believes that RYAM got a bargain then the smart play is to shift and benefit from the upside ahead for RYAM.   Here is what I think happens in the next 2 years:

1) SC continues to see strong demand.   Producers have more leverage now that RYAM and TMB are married up...thus SC prices see a continued rise.  RYAM's estimated EBITDA at the time of the spinoff from Rayonier was 317mm.    They are currently running at 200mm.    TMB's upper range for SC is 150-180mm.   In a strong market the combined SC operations produce 400-450mm in EBITDA.

2) Lumber assets and newsprint are sold to RFP for 250mm.   Despite the talk of diversification and maintainingthe asset base in Canada, RYAM is really only interested in the SC assets.   The right offer will have them singing a different tune to the media and shareholders about unlocking shareholder value.   

3) Paper pulp mill in Matane is sold.    This mill is not a strategic asset.  The Temiscaming mill produces enough to supply their onsite paperboard activities.   My guess is they get between 40-50mm for this asset.  

4) Chemicals and resin business (Longueil and Ohio) is sold.   Again, this is not a strategic asset.  

The proceeds from the asset sales will be used to pay down debt.  

In 2 years RYAM looks like this:

Sales:  1,6 billion
EBITDA:  450-480mm EBITDA
Debt:  1 billion
66mm shares outstanding (assumes maximum allotment of RYAM shares in the TMB deal). 

RYAM will trade between $35-45 based on the above.  

If I am correct then the sell TMB and buy RYAM strategy will pay off for current TMB shareholders.