S-4 1 d868015ds4.htm S-4 S-4
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As Filed with the Securities and Exchange Commission on March 17, 2020

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

RAYONIER INC.

RAYONIER, L.P.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

North Carolina

(Rayonier Inc.)

Delaware

(Rayonier, L.P.)

  6798  

13-2607329

(Rayonier Inc.)

00-0000000

(Rayonier, L.P. )

(State of Incorporation)  

(Primary Standard Industrial

Classification Code Number)

 

(IRS Employer

Identification No.)

1 Rayonier Way

Wildlight, FL 32097

Telephone: (904) 357-9100

(Address, including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Mark R. Bridwell

Vice President, General Counsel and Corporate Secretary

1 Rayonier Way

Wildlight, FL 32097

Telephone: (904) 357-9100

(Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)

 

 

With a copy to:

 

David K. Lam, Esq.

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

(212) 403-1000

 

Daemon P. Repp

Vice President & Chief Financial Officer

Pope Resources, A Delaware Limited Partnership

19950 Seventh Avenue NE, Suite 200

Poulsbo, WA 98370

(360) 691-6626

 

Marcus J. Williams, Esq.

Buchalter, P.C.

1000 Wilshire Boulevard, Suite 1500

Los Angeles, CA 90017

(213) 891-0700

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement is declared effective.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.  ☐ (Rayonier Inc.)

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.  ☐ (Rayonier, L.P.)

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐ (Rayonier Inc.)

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Securities Act”), check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐ (Rayonier, L.P.)

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐ (Rayonier)


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If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐ (Rayonier, L.P.)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer       Accelerated filer  
Non-accelerated filer     (Do not check if a smaller reporting company)   Smaller reporting company  
      Emerging growth company  

(Rayonier Inc.)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer       Accelerated filer  
Non-accelerated filer     (Do not check if a smaller reporting company)   Smaller reporting company  
      Emerging growth company  

(Rayonier, L.P.)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐ (Rayonier Inc.)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐ (Rayonier, L.P.)

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

(Rayonier Inc.)

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

(Rayonier, L.P.)

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

 

Amount

to be

registered

 

Proposed

maximum

offering price

per unit

 

Proposed

maximum

aggregate

offering price

 

Amount of

registration fee

Common stock, no par value, of Rayonier Inc.

  17,287,600(1)   N/A   $357,588,000(2)   $46,414.93(3)

Units representing limited partnership interests in Rayonier, L.P.

  17,287,600(1)   N/A   N/A(2)   N/A(3)

 

 

(1)

Based on (a) 4,000,000 units representing limited partner interests of Pope (referred to as “Pope units”) outstanding as of March 12, 2020 and (b) an exchange ratio of 3.929 shares of Rayonier common stock, no par value, or 3.929 units representing limited partnership interests of Rayonier, L.P., assuming no proration.

(2)

Calculated pursuant to Rule 457(f)(1) and Rule 457(c) under the Securities Act of 1933, as amended, solely for the purpose of calculating the registration fee based on the average of the high and low prices for Pope units as reported on the Nasdaq Stock Market LLC on March 12, 2020 ($81.27 per unit), multiplied by the estimated maximum number of units of Pope (4,400,000) that may be exchanged or converted for the securities being registered. The dollar amount represents the proposed maximum offering price for all the shares of Rayonier common stock and units representing limited partnership interests in Rayonier, L.P. that could be issued in the merger.

(3)

The registration fee for the securities registered hereby has been calculated pursuant to Section 6(b) of the Securities Act of 1933, as amended. Pursuant to Rule 457(o) under the Securities Act of 1933, as amended, the registration fee has been calculated on the basis of the maximum aggregate offering price of all the securities listed in the “Calculation of Registration Fee” table.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the SEC, acting pursuant to said section 8(a), may determine.

 

 

 


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The information in this proxy statement/prospectus is not complete and may be changed. Rayonier Inc. and Rayonier, L.P. may not sell the securities offered by this proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities, and Rayonier Inc. and Rayonier, L.P. are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION, DATED MARCH 17, 2020

 

LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP

19950 Seventh Avenue NE, Suite 200

Poulsbo, WA 98370

[            ]

Dear Pope Resources Unitholder:

You are cordially invited to attend a special meeting of unitholders (the “special meeting”) of Pope Resources, A Delaware Limited Partnership (the “Partnership,” “Pope,” “we,” “us,” or “our”), to be held on [            ] at [            ], local time, at [            ].

On January 14, 2020, Pope entered into an Agreement and Plan of Merger (the “merger agreement”) with Rayonier Inc., a North Carolina corporation (“Rayonier”), Rayonier Operating Company LLC, a Delaware limited liability company (“Opco”), Pacific GP Merger Sub I, LLC, a Delaware limited liability company and a wholly owned subsidiary of Rayonier (“Merger Sub 1”), Pacific GP Merger Sub II, LLC, a Delaware limited liability company and a wholly owned subsidiary of Rayonier (“Merger Sub 2”), Pacific LP Merger Sub III, LLC, a Delaware limited liability company and a wholly owned subsidiary of Opco (“Merger Sub 3” and together with Merger Sub 1 and Merger Sub 2, the “merger subsidiaries”), Pope EGP, Inc., a Delaware corporation and equity general partner of Pope (“EGP”), and Pope MGP, Inc., a Delaware corporation and the managing general partner of Pope (“MGP” and together with EGP, the “general partners”).

The merger agreement provides for the simultaneous mergers of the general partners and Pope with the merger subsidiaries, although as a holder of limited partner units of Pope (“Pope units”), Pope is only seeking your vote on the merger of Pope with Merger Sub 3, referred to as the “merger” in the proxy statement/prospectus accompanying this letter. If the merger is completed, you will be entitled to receive, for each Pope unit you held as of the [            ] record date, merger consideration consisting of (i) 3.929 Rayonier shares (the “stock election consideration”), (ii) 3.929 units of Rayonier, L.P., a Delaware limited partnership and a successor in interest to Rayonier Operating Company LLC (the “Opco election consideration”) or (iii) $125.00 in cash. Elections will be subject to proration so that approximately 70% of the Pope units will be exchanged for Rayonier shares or Opco units and approximately 30% of the Pope units will be exchanged for cash. Accordingly, the aggregate amount of Rayonier shares and Opco units, on the one hand, and cash, on the other hand, that will be issued in the merger will equal the amounts issued as if every Pope unit received 2.751 Rayonier shares or Opco units and $37.50 in cash. If elections for the Rayonier shares and Opco units are oversubscribed, then to reduce the effect of such proration Rayonier can, in its discretion, add additional equity (and correspondingly reduce the amount of cash) payable to unitholders who make such an election. In addition, unvested Pope units issued under Pope’s equity incentive plan and outstanding at the merger effective time will be exchanged for restricted Rayonier shares having terms and vesting schedules substantially equivalent to the unvested Pope units. The merger agreement also provides for Rayonier to acquire the general partners for consideration consisting of $10 million in cash (excluding Pope units and certain other assets owned by the general partners, all of which will be distributed to the shareholders of the general partners immediately prior to closing).

Based on the closing price of Rayonier common stock on January 14, 2020, the date of the merger agreement, the total value of the merger consideration for the Pope units was $127.51 per Pope unit, which represented a premium of approximately 36% over Pope’s closing unit price on that date. Based on the closing price of Rayonier common stock on [            ], the latest date prior to the date of this proxy statement/prospectus, the total value of the merger consideration was $[        ], which represented a premium of approximately [    ]% over Pope’s closing unit price on that date. In addition, because Opco is expected to be treated as a partnership for U.S. federal income tax purposes, certain Pope unitholders that elect and receive Opco units may not recognize any income, gain or loss as a result of the Merger. See “Material U.S. Federal Income Tax Consequences of the Merger” at page 163 of this proxy statement/prospectus. However, because the merger agreement provides for a fixed exchange ratio for the equity component, the actual value you receive will vary depending on the trading price of Rayonier shares until the effective time of the merger.

The proxy statement/prospectus and notice of special meeting accompanying this letter provide you with more specific information concerning the special meeting, the merger agreement, the mergers and the related transactions. You are encouraged to carefully read the accompanying proxy statement and its exhibits, which include a copy of the merger agreement attached as Annex A and a copy of the Amended and Restated Limited Partnership Agreement of Rayonier, L.P., the successor-in-interest to Rayonier Operating Company LLC that will act as Rayonier’s operating company after the closing, which agreement will be adopted immediately prior to the merger and which is attached as Annex D to the proxy statement/prospectus accompanying this letter.


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In reaching its recommendations as described in this proxy statement/prospectus, the board of directors of MGP (the “Pope board”) formed a committee (the “Pope special committee”) consisting solely of independent and disinterested directors of the Pope board. After receiving advice from Pope’s management and from the Pope special committee’s outside financial and legal advisors, and after due and careful discussion and consideration, including of the terms and conditions of the merger agreement, the merger and the related transactions, the Pope special committee unanimously (i) determined that the merger agreement, the merger and the related transactions are advisable and in the best interests of Pope and the Pope unitholders unaffiliated with MGP, EGP, the shareholders of MGP and EGP and their respective affiliates, and Rayonier and Opco and their respective affiliates, (ii) approved the merger agreement and the consummation by Pope of the merger and the other transactions contemplated by the merger agreement (the “related transactions”) and (iii) recommended that the Pope board (A) approve the merger agreement and the consummation by Pope of the merger and the related transactions, (B) submit the merger agreement to the Pope unitholders for approval and (C) recommend that the Pope unitholders approve the merger agreement, the merger and the related transactions. Following the recommendation of the Pope special committee, the Pope board, after consultation with Pope’s management and its legal advisors, and after considering the terms of the merger agreement, the merger and the related transactions and the recommendations of the Pope special committee unanimously (i) determined that the execution, delivery and performance by Pope of the merger agreement and the consummation by each of them of the merger is in the best interests of Pope, (ii) approved the merger agreement and the consummation by Pope of the merger and related transactions, (iii) recommended that the unitholders approve the merger agreement and the consummation by Pope of the merger and the related transactions and (iv) resolved to submit the merger agreement to a vote at a meeting of the Pope unitholders and recommend approval of the merger agreement by the Pope unitholders. The Pope board recommends unanimously that you vote “FOR” the merger agreement, the merger and the related transactions.

The Human Resources Committee of the Pope board, which serves as Pope’s compensation committee, after review and consideration of the compensation plans, arrangements and agreements between Pope and each of Pope’s named executive officers (within the meaning of Item 402(a)(3) of Regulation S-K under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder) under which such named executive officers may receive compensation that may be paid or become payable in connection with, or following, the merger, after receiving advice from Pope’s management and outside legal advisors with respect to such compensation plans, arrangements and agreements, and after due and careful discussion and consideration, has unanimously recommended to the Pope board that (i) the accompanying proxy statement/prospectus include a submission to the unitholders of a non-binding, advisory proposal to approve the compensation that may be paid or may become payable to Pope’s named executive officers in connection with, or following, the merger; and (ii) the Pope board recommend to the unitholders that the unitholders approve, by a non-binding, advisory vote at a special meeting, the compensation that may be paid or become payable to Pope’s named executive officers in connection with, or following, the merger.

The Pope board, after receiving advice from Pope’s Human Resources Committee, and after due and careful discussion and consideration, has unanimously recommended that the unitholders vote their units to approve, by a non-binding, advisory vote at a special meeting, the compensation that may be paid or may become payable to Pope’s named executive officers in connection with the merger. Accordingly, the Pope board recommends a vote “FOR” the nonbinding, advisory proposal to approve the compensation that may be paid or may become payable to Pope’s named executive officers in connection with, or following, the merger.

The merger cannot be consummated unless the merger agreement and the transactions contemplated thereby are approved by the affirmative vote of unitholders holding at least a majority of the outstanding Pope units. Accordingly, if you fail to submit a proxy or to vote in person at the special meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will have the same effect as a vote against the merger agreement and the transactions contemplated thereby, including the merger. You are encouraged to vote your Pope units promptly. If you are a unitholder who is not a limited partner, you may apply to become a limited partner in accordance with Pope’s limited partnership agreement and vote your Pope units directly after admission, but if you submit a proxy without having become a limited partner, MGP, acting in its capacity as the limited partner of record for your Pope units, will vote your Pope units as you direct.

We appreciate your investment in Pope.

Sincerely,

 

Thomas M. Ringo

President and Chief Executive Officer of Pope MGP, Inc.

Managing General Partner of Pope Resources, A Delaware Limited Partnership

[                    ]


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Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the merger or other transactions described in the attached proxy statement/prospectus or the securities to be issued pursuant to the merger under the attached proxy statement/prospectus nor have they determined if the attached proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The accompanying proxy statement/prospectus is dated [                    ] and is first being mailed to unitholders on or about [            ].


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NOTICE OF SPECIAL MEETING OF UNITHOLDERS

[            ]

[            ], Local Time

[            ]

To the Unitholders of Pope Resources, A Delaware Limited Partnership:

The special meeting of unitholders (the “special meeting”) of Pope Resources, A Delaware Limited Partnership (the “Partnership,” “Pope,” “we,” “us” or “our”) will be held at [            ], on [            ] at [            ], local time to consider the following matters:

 

Items of Business:    1.    To consider and vote on a proposal to approve (i) the Agreement and Plan of Merger (the “merger agreement”), dated January 14, 2020, with Rayonier Inc., a North Carolina corporation (“Rayonier”), Rayonier Operating Company LLC, a Delaware limited liability company, Pacific GP Merger Sub I, LLC, a Delaware limited liability company and a wholly owned subsidiary of Rayonier , Pacific GP Merger Sub II, LLC, a Delaware limited liability company and a wholly owned subsidiary of Rayonier, Pacific LP Merger Sub III, LLC, a Delaware limited liability company and a wholly owned subsidiary of Opco (“Merger Sub 3”), Pope EGP, Inc., a Delaware corporation (“EGP”), and Pope MGP, Inc., a Delaware corporation and the managing general partner of Pope (“MGP” and together with EGP, the “general partners”) and (ii) the merger of Pope with Merger Sub 3, the “merger,” and (iii) the other transactions contemplated by the merger agreement, referred to herein, together with the merger, as the “related transactions.
   2.    To consider and vote on a nonbinding, advisory proposal to approve the compensation that may be paid or may become payable to Pope’s named executive officers in connection with, or following, the merger (the nonbinding, advisory proposal, referred to as the “nonbinding compensation proposal,” relates only to contractual obligations of Pope in existence prior to the merger that may result in payments to Pope’s named executive officers in connection with, or following, the merger. The nonbinding compensation proposal does not relate to any new compensation or other arrangements between Pope’s named executive officers and Rayonier or, following the merger, the surviving entity and its subsidiaries).
   3.    To consider and vote on a proposal to adjourn the special meeting if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement and the transactions contemplated thereby, including the merger (the “adjournment proposal”).

Record Date:

 

      Only unitholders or limited partners who are holders of record of units representing limited partner interests in Pope (each, a “Pope unit”) at the close of business on [            ], the record date for the special meeting (the “record date”), or their legal proxy holders are entitled to attend or vote at the special meeting or any adjournments or postponements thereof, unless any such adjournment or postponement is for more than 45 days, in which event MGP is required to set a new record date. MGP, acting in its capacity as limited partner of record for Pope unitholders who are not admitted as limited partners, will serve as the legal proxy holder for any “assignees”, meaning a holder of Pope units who is not a limited partner but who submits a proxy, and will vote such unitholder’s Pope units as directed by such unitholder. For purposes of this proxy statement and the merger agreement, depositary receipts representing Pope units are treated as indistinguishable from the Pope units themselves. Also


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      for purposes of this proxy statement, a unitholder who held units as of the record date but who subsequently is admitted as a limited partner, will be deemed to have been a limited partner as of the date such unitholder acquired his, her or its units.
General:       Each unitholder who is not a limited partner is invited, but not required, to apply to be admitted as a limited partner, in accordance with the Second Amended and Restated limited partnership Agreement of Pope, dated as of February 20, 2019 (the “Pope limited partnership agreement”), in order to be eligible to vote such unitholder’s Pope units at the meeting. If you are a unitholder who has not been admitted as a Pope limited partner, then your proxy serves as an instruction to MGP, which serves as the limited partner of record for Pope units held by assignees, how to vote your units, and MGP will respond accordingly.
      For more information concerning the special meeting, the merger agreement and the related transactions, please review the accompanying proxy statement and the copy of the merger agreement attached as Annex A to the proxy statement.
      Appraisal rights are not available in connection with the merger under the Delaware Revised Uniform Limited Partnership Act (the “DRULPA”), the merger agreement or Pope limited partnership agreement.
      A special committee of directors (the “Pope special committee”) of the board of directors of MGP (the “Pope board”) after receiving advice from its outside financial and legal advisors and Pope’s management, and after due and careful discussion and consideration, including of the terms and conditions of the merger agreement, the merger and the related transactions, has unanimously (i) determined that the merger agreement and the related transactions are advisable and in the best interests of Pope and the Pope unitholders unaffiliated with MGP, EGP, the shareholders of MGP and EGP and their respective affiliates, and Rayonier and Opco and their respective affiliates (the “unaffiliated Pope unitholders”), (ii) approved the merger agreement and the consummation by Pope of the merger and the related transactions and (iii) recommended that the Pope board (A) approve the merger agreement and the consummation by Pope of the merger and the related transactions, (B) submit the merger agreement to the Pope unitholders for approval and (C) recommend that the Pope unitholders approve the merger agreement, the merger and the related transactions.
      The Human Resources Committee of the Pope board, after review and consideration of the compensation plans, arrangements and agreements between Pope and each of Pope’s named executive officers under which such named executive officers may receive compensation that may be paid or become payable in connection with, or following, the merger, and after receiving advice from Pope’s management and outside legal advisors with respect to such compensation plans, arrangements and agreements and after due and careful discussion and consideration, has unanimously recommended to the Pope board that (i) the proxy statement include a submission to the unitholders of a non-binding, advisory proposal to approve the compensation that may be paid or may become payable to Pope’s named executive officers in connection with, or following, the merger and (ii) the Pope board recommend to the unitholders that the unitholders approve, by a non-binding, advisory vote at the special meeting, the compensation that may be paid or become payable to Pope’s named executive officers in connection with, or following, the merger.
      The Pope board, after receiving advice from Pope’s management and outside legal advisors and the recommendations of the Pope special committee, and after due and careful discussion and consideration, including of the terms and


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      conditions of the merger agreement, the merger and the related transactions, and the compensation arrangements pursuant to which amounts may be paid or may become payable to Pope’s named executive officers in connection with, or following, the merger has unanimously (i) determined that the merger agreement and the consummation of the merger and the related transactions are in the best interests of Pope; (ii) authorized and approved the execution, delivery and performance by Pope of the merger agreement and the consummation of the merger and the related transactions; (iii) resolved to submit the merger agreement and the merger to a vote at a meeting of Pope unitholders; (iv) recommended that the unitholders vote their units to approve the merger and the related transactions at the special meeting; and (v) recommended that the unitholders vote their units to approve, by a non-binding, advisory vote at a special meeting, the compensation that may be paid or may become payable to Pope’s named executive officers in connection with, or following, the merger.
      Accordingly, the Pope board recommends a vote “FOR” the proposal to approve the merger agreement, the merger and the related transactions, “FOR” the nonbinding compensation proposal and, if necessary, “FOR” the adjournment proposal.
      Regardless of whether you plan to personally attend the meeting, please cast your vote by following the internet or telephone voting instructions on the proxy card. If you have received this proxy statement by mail, you may also vote by completing, signing and dating the enclosed proxy card and returning it promptly in the accompanying envelope. If for any reason you desire to revoke your proxy, you may do so at any time before the vote is held at the special meeting by following the procedures described in the accompanying proxy statement. If you hold units through an account with a brokerage firm, bank, trust, custodian or other nominee, please follow the instructions you receive from them to vote your Pope units. If you are a unitholder that is not a limited partner, you may, but are not required to, apply for admission as a limited partner by following the instructions on the Pope application included with the proxy card. If you do not become a limited partner, you may still vote your Pope units by submitting a proxy card, and MGP, acting in its capacity as limited partner of record for your Pope units, will vote your units as directed on your proxy card.

By Order of the Board of Directors of MGP, as Managing General Partner of Pope Resources, A Delaware Limited Partnership.

Poulsbo, Washington

[                    ]

Thomas M. Ringo

President and Chief Executive Officer of Pope Resources

Sandy D. McDade

Lead Director of the Pope board


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TABLE OF CONTENTS

 

     Page  

EXPLANATORY NOTE

     1  

REFERENCES TO ADDITIONAL INFORMATION

     2  

ABOUT THIS PROXY STATEMENT/PROSPECTUS

     3  

QUESTIONS AND ANSWERS ABOUT THE MERGER AND POPE MEETING

     4  

SUMMARY

     16  

Parties to the Merger

     16  

The Merger and the Merger Agreement

     18  

Merger Consideration

     18  

Treatment of Pope Equity Compensation

     19  

Financing of the Merger

     19  

Accounting Treatment

     19  

Recommendation of the Pope Special Committee; Recommendation of the Pope Board of Directors; Pope’s Reasons for the Merger

     20  

Opinion of the Pope Special Committee’s Financial Advisor

     20  

Information About Pope Meeting

     21  

Agreement with Certain Pope Unitholders

     22  

Interests of Pope’s Directors and Executive Officers in the Merger

     23  

Regulatory Approvals

     23  

No Appraisal Rights

     23  

Conditions to Completion of the Merger

     23  

No Solicitation

     24  

No Change in Recommendation or Entry into Alternative Acquisition Agreement

     24  

Termination of the Merger Agreement

     25  

U.S. Federal Income Tax Consequences

     26  

Comparison of Unitholders’/Shareholders’ Rights

     27  

Risk Factors

     27  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF RAYONIER INC.

     28  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF RAYONIER OPERATING COMPANY LLC

     29  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF POPE

     30  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

     31  

COMPARATIVE PER SHARE DATA

     32  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION—RAYONIER INC.

     33  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION—RAYONIER OPERATING COMPANY LLC

     48  

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     63  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     65  

RISK FACTORS

     67  

INFORMATION ABOUT RAYONIER

     79  

INFORMATION ABOUT POPE

     81  

INFORMATION ABOUT THE SPECIAL MEETING

     82  

Time, Place and Purpose of the Pope Meeting

     82  

Record Date and Quorum

     82  

Vote Required

     82  

Proxies and Revocations

     82  

Expected Timing of the Merger

     83  

Solicitation of Proxies; Payment of Solicitation Expenses

     83  

 

i


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     Page  

THE MERGER

     85  

The Merger

     85  

Merger Consideration

     85  

Elections and Proration

     86  

Financing of the Merger

     88  

Accounting Treatment

     88  

Background of the Merger

     88  

Recommendation of the Pope Board of Directors; Pope’s Reasons for the Merger

     117  

Opinion of Pope Special Committee’s Financial Advisor

     123  

Financial Forecasts

           

Financial Projections

           

Certain Effects of the Merger

     132  

Effects on Pope if the Merger Is Not Consummated

     133  

Closing and Effective Time

     133  

NYSE Market Listing

     133  

Regulatory Approvals

     134  

Treatment of Pope Equity Compensation

     134  

Voting Agreements with Certain Pope Unitholders

     134  

Delisting and Deregistration of Pope units

     135  

Expected Timing of the Merger

     135  

THE MERGER AGREEMENT

     136  

Explanatory Note Regarding the Merger Agreement

     136  

Merger effective time, Effects of the Mergers; Organizational Documents of the Surviving Company; Directors and Officers

     136  

Exchange and Payment Procedures

     137  

Treatment of Pope Equity Compensation

     138  

Representations and Warranties of Pope, MGP and EGP

     138  

Representations and Warranties of Rayonier, Rayonier Operating Company LLC, Merger Sub 1, Merger Sub 2 and Merger Sub 3

     140  

Conduct of Pope’s Business Prior to Completion of the Merger

     141  

Conduct of Rayonier’s Business Prior to Completion of the Merger

     143  

No Solicitation

     144  

No Change in Recommendation or Entry into Alternative Proposal Agreement

     145  

Pope Meeting

     147  

Access to Information

     147  

Expenses

     148  

Employee Matters

     148  

Indemnification and Insurance

     149  

Rayonier and Pope Dividends

     149  

Financing Cooperation

     149  

Certain Additional Covenants

     150  

Conditions to Completion of the Merger

     150  

Termination of the Merger Agreement

     152  

Amendment and Modification

     153  

Jurisdiction; Specific Enforcement

     153  

INTERESTS OF POPE’S DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

     154  

Treatment of Outstanding Equity Awards

     154  

Quantification of Potential Payments and Benefits to Pope’s Named Executive Officers in Connection with the Merger

     154  

Severance Arrangements

     155  

Incentive Payments

     156  

 

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     Page  

Continuing Employee Benefits

     156  

Retention Bonuses

     157  

Quantification of Payments and Benefits

     157  

Golden Parachute Compensation to Named Executive Officers

     158  

GP Merger Consideration  & GP Pre-Closing Distribution

     159  

Certain Consideration Payable to General Partner Stockholders

     160  

Indemnification and Insurance

     160  

Tax Protection Agreement

     160  

Shareholders Agreement

     160  

Vote Required and Board of Directors Recommendation

     161  

ADJOURNMENT OF POPE MEETING TO SOLICIT ADDITIONAL PROXIES

     162  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     163  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF OPCO UNIT AND RAYONIER SHARE OWNERSHIP

     170  

RAYONIER OPERATING COMPANY LLC INFORMATION

     201  

DIRECTOR COMPENSATION

     273  

OWNERSHIP OF AND TRADING IN RAYONIER’S SHARES

     275  

DESCRIPTION OF RAYONIER CAPITAL STOCK

     278  

DESCRIPTION OF RAYONIER COMMON STOCK

     279  

DESCRIPTION OF RAYONIER, L.P. LIMITED PARTNER UNITS

     281  

COMPARISON OF RIGHTS OF COMMON EQUITY HOLDERS OF RAYONIER AND RAYONIER, L.P. AND UNITHOLDERS OF POPE

     285  

VALIDITY OF SECURITIES TO BE ISSUED

     292  

EXPERTS

     292  

HOUSEHOLDING OF PROXY MATERIALS

     293  

WHERE YOU CAN FIND MORE INFORMATION

     293  

Pope:

     293  

Rayonier:

     293  

List of Annexes and Exhibits

 

Annex A    Agreement and Plan of Merger, dated as of January 14, 2020
Annex B    Voting and Support Agreement of Maria M. Pope and Affiliates dated January 14, 2020
Annex C    Voting and Support Agreement of Gordon P. Andrews and Affiliates dated January 14, 2020
Annex D    Form of Amended and Restated Agreement of Limited Partnership of Rayonier, L.P.
Annex E    Opinion of Centerview Partners, LLC, dated as of January 14, 2020
Annex F    Audited Consolidated Statements of Income and Balance Sheets of Rayonier Operating Company LLC
Annex G    Form of Tax Protection Agreement

 

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EXPLANATORY NOTE

This proxy statement/prospectus combines disclosure in respect of Rayonier Inc., a North Carolina corporation, and Rayonier, L.P., a Delaware limited partnership and a successor in interest to Rayonier Operating Company LLC (“Opco”), each of which is a registrant in respect of the Rayonier shares and Opco units, respectively, to be offered in connection with the merger. Unless stated otherwise or the context otherwise requires, references to “Rayonier” means Rayonier Inc. and references to “Opco” or the “Rayonier Operating Partnership” means Rayonier, L.P., as a successor in interest to Rayonier Operating Company LLC.

Rayonier elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, referred to as the Code, commencing with its taxable year ended December 31, 2004. Rayonier is structured as an umbrella partnership REIT under which substantially all of its business is conducted through Rayonier Operating Company LLC and, after the merger, through Rayonier Operating Partnership. Rayonier will be the general partner of Rayonier Operating Partnership. After giving effect to the mergers and assuming Pope unitholders elect to receive Opco units up to the available equity amount, Rayonier will indirectly own an approximate 91% ownership interest in Rayonier Operating Partnership, with the remaining 9% ownership interest owned by limited partners of the Rayonier Operating Partnership. As the sole general partner of the Rayonier Operating Partnership, Rayonier will have exclusive control of the day-to-day management of Rayonier Operating Partnership.

Rayonier and Rayonier Operating Partnership will be operated as one business. The management of Rayonier Operating Partnership will consist of the same members as the management of Rayonier. As general partner with control of Rayonier Operating Partnership, Rayonier expects to consolidate Rayonier, L.P. for financial reporting purposes, and Rayonier will have no material assets or liabilities other than its investment in Rayonier Operating Partnership.

There are a few important differences between Rayonier and Rayonier Operating Partnership in the context of how Rayonier expects to operate as a consolidated company. The primary difference is that Rayonier itself does not, and after the mergers does not expect to, conduct business, other than through acting as the general partner of Rayonier Operating Partnership and issuing equity or equity-related instruments from time to time. Rayonier Operating Partnership will hold, directly or indirectly, substantially all of Rayonier’s assets. After giving effect to the mergers, Rayonier Operating Partnership will continue to conduct substantially all of Rayonier’s business and will be structured as a partnership with no publicly traded equity.


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REFERENCES TO ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Pope and Rayonier from other documents that Pope and Rayonier have filed with the U.S. Securities and Exchange Commission, referred to as the SEC, and that are contained in or incorporated by reference into this proxy statement/prospectus. For a listing of documents incorporated by reference into this proxy statement/prospectus, please see the section entitled “Where You Can Find More Information” beginning on page 293 of this proxy statement/prospectus. This information is available for you to review at the SEC’s public reference room located at 100 F Street, N.E., Room 1580, Washington, DC 20549, and through the SEC’s website at www.sec.gov.

You may request copies of this proxy statement/prospectus and any of the documents incorporated by reference into this proxy statement/prospectus or other information concerning Rayonier, without charge, by telephone or written request directed to: Investor Relations at 1 Rayonier Way, Wildlight, FL 32097, telephone (904) 357-9100.

You may request copies of this proxy statement/prospectus and any of the documents incorporated by reference into this proxy statement/prospectus or other information concerning Pope, without charge, by telephone or written request directed to Pope’s Investor Relations Department at [                ], telephone (360) 697-6626; or MacKenzie Partners, Pope’s proxy solicitor, at [                ], or toll-free at [                ].

In order for you to receive timely delivery of the documents in advance of the special meeting to be held on [                    ], you must request the information no later than five business days prior to the date of the special meeting, by [            ].

 

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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the SEC by Rayonier and Rayonier, L.P. (File No. 333-[ ]), constitutes a prospectus of Rayonier Inc. and Rayonier, L.P. under Section 5 of the Securities Act of 1933, as amended, referred to as the Securities Act, with respect to the shares of common stock, no par value, of Rayonier, referred to as Rayonier shares, and with respect to units representing limited partnership interests of Rayonier, L.P., as a successor in interest to Rayonier Operating Company LLC, referred to as Opco units, to be issued to Pope unitholders pursuant to the Agreement and Plan of Merger, dated as of January 14, 2020, by and among Rayonier, Rayonier Operating Company LLC, Pacific GP Merger Sub I, LLC, Pacific GP Merger Sub II, LLC, Pacific LP Merger Sub III, LLC, Pope, Pope MGP, Inc. and Pope EGP, Inc., as it may be amended or supplemented from time to time, referred to as the merger agreement. This document also constitutes a proxy statement of Pope under Section 14(a) of the Securities Exchange Act of 1934, as amended, referred to as the Exchange Act. It also constitutes a notice of meeting with respect to the special meeting, at which Pope unitholders will be asked to consider and vote upon the approval of the merger agreement and the transactions contemplated thereby.

Rayonier Inc. and Rayonier, L.P. have supplied all information contained or incorporated by reference into this proxy statement/prospectus relating to Rayonier, Rayonier Operating Company LLC (as predecessor to Rayonier, L.P.), Pacific GP Merger Sub I, LLC, referred to as Merger Sub 1, Pacific GP Merger Sub II, LLC, referred to as Merger Sub 2, and Pacific LP Merger Sub III, LLC, referred to as Merger Sub 3, and Pope has supplied all such information relating to Pope, Pope MGP, Inc., referred to as MGP, and Pope EGP, Inc., referred to as EGP.

You should rely only on the information contained in or incorporated by reference into this proxy statement/prospectus. Rayonier Inc., Rayonier, L.P. and Pope have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference into this proxy statement/prospectus. This proxy statement/prospectus is dated [            ], and you should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date. Further, you should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of the incorporated document. Neither the mailing of this proxy statement/prospectus to Pope unitholders nor the issuance by Rayonier of shares of its common stock or Rayonier, L.P., as successor in interest to Rayonier Operating Company LLC, of units pursuant to the merger agreement will create any implication to the contrary.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND POPE MEETING

The following questions and answers are intended to briefly address some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a Pope unitholder. Please refer to the section entitled “Summary” beginning on page 16 of this proxy statement/prospectus and the more detailed information contained elsewhere in this proxy statement/prospectus, the annexes to this proxy statement/prospectus and the documents referred to in this proxy statement/prospectus, which you should read carefully and in their entirety. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions under the section entitled “Where You Can Find More Information” beginning on page 293 of this proxy statement/prospectus.

 

Q:

What is the merger?

 

A:

Rayonier, Opco and Pope have agreed to a business combination under the terms of the merger agreement, pursuant to which Merger Sub 3 will merge with and into Pope, with Pope surviving the merger as an indirect wholly owned subsidiary of Opco.

Pursuant to the merger agreement, each unit representing limited partnership interests of Pope, referred to as Pope units, outstanding immediately prior to the merger effective time will, at the option of its holder, have the right to elect to receive for each Pope unit and subject to proration as described below:

 

   

3.929 Rayonier shares, referred to as the stock election consideration;

 

   

3.929 Opco units, referred to as the Opco election consideration; or

 

   

$125.00 in cash, referred to as the cash election consideration.

Pope unitholders who do not make a valid election will receive the stock election consideration. Pope unitholders’ elections will be subject to proration so that approximately 70% of the Pope units will be exchanged for Rayonier shares or Opco units and approximately 30% of the Pope units will be exchanged for cash. These proration procedures are designed to allocate the merger consideration so that the aggregate amount of Rayonier shares and Opco units, on the one hand, and cash, on the other hand, that will be issued in the merger will equal the amounts issued as if every Pope unit received 2.751 Rayonier shares or Opco units and $37.50 in cash. If stock election consideration and Opco election consideration are oversubscribed, then to reduce the effect of such proration, Rayonier can, in its discretion, add additional equity (and decrease the amount of cash) payable to the Pope unitholders making the stock election and the Opco election.

This proxy statement/prospectus includes important information about the merger, the merger agreement (a copy of which is attached as Annex A to this proxy statement/prospectus) and the special meeting. Pope unitholders should read this information carefully and in its entirety. The enclosed voting materials allow unitholders who are limited partners to vote their units (or, in the case of Pope unitholders who are not limited partners, to direct MGP to vote their Pope units) without attending the special meeting in person.

 

Q:

Why am I receiving this proxy statement/prospectus and proxy card?

 

A:

Pope is holding a special meeting to ask its unitholders to consider and vote upon a proposal to approve the merger agreement and the transactions contemplated thereby, including the merger. Pope unitholders are also being asked to consider and vote upon (i) a proposal to approve, by advisory (non-binding) vote, the merger-related executive compensation and (ii) a proposal to grant authority to proxy holders to vote in favor of adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

Your vote is important. You are encouraged to vote as soon as possible.

 

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Q:

What is the vote required to approve each proposal at the special meeting?

 

A:

Approval of the merger requires that limited partners (including MGP acting in its capacity as limited partner of record for Pope units held by assignees) holding a majority of the Pope units issued and outstanding as of the record date vote in favor of approval of the merger agreement. If you fail to submit a proxy or to vote in person at the special meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will not be counted as a vote “FOR” and will thus have the same effect as a vote against the merger agreement and the merger. Accordingly, your vote is important and you are encouraged to vote as soon as possible.

If you own Pope units but have not been admitted as a limited partner, the Pope limited partnership agreement generally provides that you are an “assignee” for purposes of your ownership of Pope units. This means that you hold the economic rights associated with those Pope units, but unless you are admitted as a limited partner, you do not have the right to vote your Pope units directly. Instead, assignees are being asked to direct MGP to vote their Pope units as instructed in their proxy, and MGP, in its capacity as managing general partner and limited partner of record for all Pope units held by assignees, and as required by the merger agreement, will vote those Pope units in accordance with those instructions.

The proposal to approve the merger-related executive compensation requires that a majority of the votes cast at the special meeting are voted in favor of the proposal; however, such vote is advisory (non-binding). If you fail to submit a proxy or to vote in person at the special meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will not be counted as “FOR” or “AGAINST” and will not have an effect on the advisory (non-binding) vote to approve the merger-related executive compensation except to the extent it results in there being insufficient Pope units present at the special meeting to establish a quorum.

The approval of adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement requires that a majority of the votes cast at the special meeting are voted in favor of the proposal, whether or not a quorum is present. If you fail to submit a proxy or to vote in person at the special meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will not be counted as “FOR” or “AGAINST” and will thus not have an effect on the vote to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

See the section entitled, “Information About the Special Meeting—Record Date and Quorum” beginning on page 82 of this proxy statement/prospectus.

 

Q:

Who may attend the special meeting? Are there procedures for attending?

 

A:

Only limited partners of record at the close of business on the record date, or their legal proxy holders are entitled to attend the special meeting or any adjournments or postponements thereof. Unitholders of record as of the record date that are admitted as substituted limited partners prior to the special meeting will be considered limited partners of record as of the record date and will be able to attend the special meeting. Due to space constraints and other security considerations, guests of either unitholders or their proxy holders will not be admitted to the special meeting.

To be admitted to the special meeting, you must present valid proof of ownership of Pope units as of [            ], or a valid proxy. All attendees must also provide a form of government-issued photo identification, such as a driver’s license or passport. In addition, if you hold your Pope units in street name, such as through a bank, brokerage firm or other nominee, you must provide proof of ownership of your Pope units, such as a the voting instruction card from your broker or other nominee or an account statement showing your ownership as of the record date. Additionally, you must have been admitted as a limited partner of Pope prior to the special meeting if you wish to vote your Pope units in person on any proposal. Pope recommends that, if you have evidence of your admission, such as a confirmation letter, you bring that

 

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document with you to the special meeting. If you arrive at the special meeting without the required items, Pope will admit you only if it is able to verify that you are a unitholder as of close of business on the record date.

 

Q:

What is the difference between a unitholder and a limited partner?

 

A:

Any person who owns Pope units, whether they hold them directly, by holding depositary receipts relating to such units or hold such units in street name, such as through a bank, brokerage firm or other nominee, is a unitholder for purposes of the special meeting. However, under the Pope limited partnership agreement, only persons who have been admitted as a limited partner may directly vote their units or attend the special meeting. If you are not a limited partner of record, you are being asked to direct MGP to vote your Pope units as instructed in your proxy, and MGP, in its capacity as managing general partner and limited partner of record for all Pope units held by assignees, will vote those Pope units in accordance with your instructions.

 

Q:

Must I become a limited partner to vote my Pope units?

 

A:

No. If you hold Pope units but have not been admitted as a limited partner, the Pope limited partnership agreement provides that you are an “assignee” with respect to your Pope units. If you are an assignee, you should complete and sign the enclosed proxy card, and MGP, in its capacity as managing general partner and limited partner of record for all Pope units held by assignees, and as required by the merger agreement, will vote your Pope units in accordance with your instructions.

 

Q:

Who is entitled to vote at the special meeting?

 

A:

Only unitholders that are limited partners as of the record date or are admitted as substituted limited partners as of the record date in connection with this solicitation, or their legal proxy holders, are entitled to vote at the special meeting or any adjournments thereof, unless such adjournment is for more than 45 days, in which event MGP is required to set a new record date. As of the close of business on the record date, there were [                ] Pope units outstanding and entitled to vote. Each limited partner, including each substituted limited partner, is entitled to one vote for each unit held by such limited partner on the record date on each of the proposals presented in this proxy statement.

If you are a unitholder and a limited partner as of the record date (that is, if you held Pope units in your own name in the unit transfer records maintained by Pope’s transfer agent, Computershare Limited) you may vote in person at the special meeting or by proxy. Whether or not you intend to attend the special meeting, you are encouraged to apply and vote now, online, by phone or proxy card to ensure that your vote is counted.

If you are an assignee as of the record date, then you may direct MGP to vote your Pope units as instructed in your proxy, and MGP, in its capacity as managing general partner and limited partner of record for all Pope units held by assignees, and as required by the merger agreement, will vote those Pope units in accordance with your instructions.

Whether or not you intend to attend the special meeting, you are encouraged to apply and vote now, either online, by phone or proxy card to ensure that your vote is counted.

If you are the beneficial owner of units held in “street name” as of the record date (that is, if you held Pope units through your bank, brokerage firm or other nominee) then these materials are being forwarded to you by your broker. You may direct such nominee how to vote your Pope units by following the instructions on the form provided by such nominee. If you wish to attend the special meeting and vote in person, you may attend the special meeting but may not be able to vote in person unless you first obtain a legal proxy issued in your name from your broker.

 

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A list of limited partners entitled to vote at the special meeting will be open to the examination of any limited partner during ordinary business hours for a period of ten days before the special meeting at [            ] and at the place of the special meeting during the special meeting.

 

Q:

Who can vote at the special meeting?

 

A:

All limited partners of record as of the close of business on [            ], the record date for the special meeting, referred to as the record date, are entitled to receive notice of, and to cast a vote at, the special meeting. Each holder of Pope units is entitled to cast one vote on each matter properly brought before the special meeting for each Pope unit that such holder owned of record as of the record date.

Pursuant to the Pope limited partnership agreement, certain Pope unitholders, referred to as “Pope assignees,” have not yet been admitted as limited partners in accordance with the Pope limited partnership agreement generally because these holders received their Pope units in a transfer from another Pope unitholder as contemplated by the Pope limited partnership agreement.

Pursuant to the Pope limited partnership agreement and as required by the merger agreement, in seeking approval of the merger and the merger agreement, MGP will serve as limited partner of record for all Pope units held by the Pope assignees, and MGP shall vote such units as may be directed by the Pope assignee holding such units (in the case where such assignee gives such a direction but does not elect to become a limited partner).

Accordingly, a Pope assignee can only vote in respect of the merger by instructing MGP, as the limited partner of record for such assignee’s units, to vote their Pope units in accordance with the instructions provided by the Pope assignee on the form attached as an exhibit to this proxy statement/prospectus. In the case where a Pope assignee does not give such a direction and does not elect to become a limited partner, MGP shall abstain from voting the Pope units held by such assignee, which shall have the same effect as if those units voted against the merger.

 

Q:

What is the difference between holding units as a unitholder of record and as a beneficial owner?

 

A:

You are a “limited partner of record” if your limited partner units are registered directly in your name with Pope’s transfer agent, Computershare. As the limited partner of record, you have the right to vote in person at the special meeting. You may also vote by Internet or telephone, as described in the notice and below under the heading “How do I vote?”

You are deemed to beneficially own Pope units in “street name” if your units are held by a bank, brokerage firm or other nominee or other similar organization. Your bank, brokerage firm or other nominee will send you, as the beneficial owner, a package describing the procedure for voting your units. You should follow the instructions provided by them to vote your units. You may not vote your units in person at the special meeting unless you obtain a “legal proxy” from your bank, brokerage firm or other nominee that holds your units, giving you the right to vote the shares at the special meeting.

 

Q:

How does the Pope board recommend that I vote at the special meeting?

 

A:

The Pope board unanimously recommends that Pope unitholders vote FOR the approval of the merger agreement, the merger and related transactions FOR the approval, by advisory (non-binding) vote, of the merger-related executive compensation and FOR adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement. See the section entitled “The Merger—Recommendation of the Pope Special Committee; Recommendation of the Pope Board of Directors; Pope’s Reasons for the Merger” beginning on page 117 of this proxy statement/prospectus.

 

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Q:

Am I being asked to vote to approve the GP mergers?

 

A:

The merger agreement also contemplates that, substantially concurrent with the merger effective time, each of MGP and EGP, the general partners of Pope, will be acquired by merger subsidiaries of Rayonier for an aggregate consideration of $10,000,000 in cash payable to their respective stockholders, subject to certain adjustments set forth in the merger agreement and described in the section entitled “Interests of Pope’s Directors and Executive Officers in the Merger” beginning on page 154. These mergers, referred to as the GP mergers, only require the consent of a majority of the stockholders of each of MGP and EGP, which consents were delivered promptly after the execution of the merger agreement and are irrevocable.

Accordingly, and consistent with the governing documents of each of Pope, MGP and EGP, Pope is only seeking your vote with respect to the approval of the merger agreement and the merger, together with a proposal to approve, by advisory (non-binding) vote, the merger-related executive compensation and a proposal to grant authority to proxy holders to vote in favor of adjournment of the special meeting. No additional or specific approvals are being sought in respect of the GP mergers.

 

Q:

Why did the Pope board approve the merger agreement and the transactions contemplated by the merger agreement, including the merger?

 

A:

To review the Pope board’s reasons for approving and recommending approval of the merger agreement and the transactions contemplated by the merger agreement, including the merger, see the section entitled “The Merger—Recommendation of the Pope Special Committee; Recommendation of the Pope Board of Directors; Pope’s Reasons for the Merger” beginning on page 117.

See the section entitled “Merger—Per Share Merger Consideration” beginning on page 85 of this proxy statement/prospectus for a further description of the merger consideration and proration procedures.

 

Q:

What is the value of the per Pope unit merger consideration?

 

A:

The exact value of the per unit merger consideration that Pope unitholders receive will depend on the election a Pope unitholder makes, the aggregate elections of other Pope unitholders and the price per Rayonier share at the time of the merger. The number of Pope unitholders electing certain types of consideration will not be known at the time of the special meeting and may change the type of consideration a unitholder receives. Likewise, the price of Rayonier shares and the value of the Opco units will not be known at the time of the special meeting and may be less than the current price or the price at the time of the special meeting.

Based on the closing stock price of Rayonier shares of $32.72 on the NYSE on January 14, 2020, the last trading day before public announcement of the merger, the value of the per unit merger consideration for a Pope unitholder electing Rayonier shares would be $127.51 for each Pope unit, assuming the amount of Pope unitholders electing Rayonier shares or Opco units does not exceed the number of Rayonier shares and Opco units available under the merger agreement. Based on the closing stock price of Rayonier shares of $[        ] on the NYSE on [                    ], the latest practicable date before the mailing of this proxy statement/prospectus, the value of the per Pope unit merger consideration would be $[        ] for each Pope unit electing Rayonier shares, again assuming the amount of Pope unitholders electing Rayonier shares or Opco units does not exceed the available amount of Rayonier equity available under the merger agreement. You are urged to obtain current market quotations for shares of Rayonier shares and Pope units.

Shares of Opco units will be exchangeable, subject to certain conditions and restrictions, on a one-for-one basis with Rayonier shares, as further described in the section entitled “Description of Rayonier, L.P. Limited Partner Units” beginning on page 281 of this proxy statement/prospectus. Opco units will not be listed on any exchange, will have restrictions on their transferability and are not expected to have an active quoted price.

 

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Q:

What happens if I am eligible to receive a fraction of a Rayonier share or a fractional Opco unit as part of the per Pope unit merger consideration?

 

A:

If you elect to receive Rayonier shares or Opco units and the aggregate number Rayonier shares or Opco units that you are entitled to receive as part of the merger consideration includes a fraction of a Rayonier share or a fraction of an Opco unit, you will receive cash in lieu of that fractional share or Opco unit, as the case may be. See the section entitled “The Merger Agreement—Effects of the merger on Capital Stock” beginning on page 132 of this proxy statement/prospectus.

 

Q:

What will holders of restricted Pope unit awards receive in the merger?

 

A:

If the merger is completed, each outstanding and unvested restricted Pope unit award will be converted into 3.929 restricted Rayonier shares, except as discussed below, with such awards having substantially the same terms and vesting schedule that were previously applicable to the restricted Pope unit awards. Restricted Pope unit awards held by directors, including Mr. Ringo, will become 100% vested immediately prior to the merger effective time, and such units will be treated the same as other Pope units in the merger. Converted awards that are held by employees whose employment terminates under certain circumstances between the merger effective time and the second anniversary thereof generally will vest in full to the extent not previously vested. For a more complete summary of the treatment of restricted Pope unit awards pursuant to the merger agreement, see the section entitled “The Merger Agreement—Treatment of Pope Equity Compensation” beginning on page 138 of this proxy statement/prospectus.

 

Q:

What will happen to Pope as a result of the merger?

 

A:

If the merger is completed, Merger Sub 3 will be merged with and into Pope, with Pope continuing as the surviving entity and an indirect wholly owned subsidiary of Rayonier Operating Partnership, which is currently a wholly owned subsidiary of Rayonier and, after the merger, will be a wholly owned subsidiary of Rayonier Operating Partnership. As a result of the merger, Pope will no longer be a publicly held company. Following the merger, Pope units will be delisted from the Nasdaq and deregistered under the Exchange Act and the Pope units will no longer be traded on the Nasdaq or any other public market.

 

Q:

What equity stake will Pope unitholders hold in Rayonier immediately following the merger?

 

A:

Based on the number of issued and outstanding Rayonier shares and Pope units as of January 14, 2020, and assuming that Pope unitholders elect to receive Rayonier shares and Opco units up to the available equity amount, Pope unitholders as of immediately after the closing of the merger will hold, in the aggregate, approximately 9% of the issued and outstanding Rayonier shares and Opco units, collectively.

 

Q:

When do you expect the merger to be completed?

 

A:

Subject to the satisfaction or waiver of the closing conditions described under the section entitled “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 150 of this proxy statement/prospectus, including the approval of the merger agreement, the merger and the related transactions by Pope unitholders at the special meeting, Rayonier and Pope presently expect that the merger will be completed in mid-2020. However, it is possible that factors outside the control of both companies could result in the merger being completed at a different time or not at all.

 

Q:

What are the expected U.S. federal income tax consequences of the merger to Pope unitholders?

 

A:

Although for state law purposes Pope will become a wholly owned subsidiary of Rayonier, L.P., as successor in interest to Rayonier Operating Company LLC, in the merger, for U.S. federal income tax purposes Rayonier, L.P. will be treated as a continuation of Pope (and Rayonier, L.P. shall not exist) following the merger pursuant to U.S. Treasury regulations promulgated under Section 708 of Code.

 

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As a result, U.S. holders (as defined in the discussion under the heading “Material U.S. Federal Income Tax Consequences of the Merger”) that receive Opco units in the merger should not recognize any income, gain or loss with respect to the Opco units that they receive as part of the exchange, except to the extent that any net decrease in such holder’s share of partnership liabilities pursuant to Section 752 of the Code exceeds such holder’s adjusted tax basis in the Pope units exchanged for Opco units at the closing of the merger. However, it is not anticipated that gain or loss generally should be recognized by a U.S. holder solely as a result of a decrease in such holder’s share of partnership liabilities. A U.S. holder that receives Opco units in the merger will recognize gain to the extent that the amount of cash received in lieu of fractional units (if any) exceeds such holder’s adjusted tax basis allocable to such portion of Pope units sold.

On the other hand, the merger will be a taxable transaction for any U.S. holder that receives cash or Rayonier shares. Each U.S. holder who receives cash or Rayonier shares (and any cash it receives in lieu of fractional Rayonier shares) in exchange for its Pope units pursuant to the merger will recognize gain or loss in an amount equal to the difference between (1) the sum of (A) the amount of any cash received, (B) the fair market value of the Rayonier shares received and (C) such U.S. holder’s share of Pope’s liabilities immediately prior to the merger effective time attributable to its Pope units exchanged for cash and/or Rayonier shares and (2) such U.S. holder’s adjusted tax basis in Pope units exchanged therefor (which includes such U.S. holder’s share of Pope’s liabilities attributable to such Pope units immediately prior to the merger effective time). Gain or loss recognized by a U.S. holder will generally be taxable as capital gain or loss. However, a portion of this gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss under Section 751 of the Code to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by Pope and its subsidiaries.

The U.S. federal income tax consequences of the merger to a U.S. holder will depend on such holder’s own personal tax situation. Accordingly, you are strongly urged to consult your own tax advisor for a full understanding of the particular tax consequences of the merger. In addition, please read the discussion under the heading “Material U.S. Federal Income Tax Consequences of the Merger—Tax Consequences of the Merger to U.S. Holders.”

 

Q:

How will I receive the merger consideration to which I am entitled?

 

A:

Each holder of record of Pope units will have the right to make an election, prior to the election deadline, to be set at a future date if the Pope unitholders approve the merger agreement and the transactions contemplated thereby at the special meeting. On the election form, each Pope unitholder will specify the number of Pope units held by that unitholder that should be converted into the cash election consideration, stock election consideration or Opco election consideration. Pope units for which a valid election is not received by the election deadline will receive the stock election consideration, subject to the proration procedures provided for in the merger agreement. An exchange agent appointed by Rayonier will handle the distribution of consideration to Pope unitholders, provided such unitholders deliver to such exchange agent properly completed election forms prior to the election deadline.

See the section entitled “The Merger Agreement—Exchange and Payment Procedures” beginning on page 137 of this proxy statement/prospectus for additional information on exchange and payment procedures.

 

Q:

Will my Rayonier shares acquired in the merger receive a dividend?

 

A:

After the closing of the merger, if you elect Rayonier shares as your merger consideration, you will be a holder of Rayonier shares, and you will receive the same dividends on Rayonier shares that all other holders of Rayonier shares will receive based on a dividend record date that occurs after the merger is completed.

Rayonier currently pays regular quarterly dividends and anticipates paying dividends on its common stock in the foreseeable future. Rayonier last paid a dividend on December 31, 2019, of $0.27 per share. Under the terms of the merger agreement, during the period before completion of the merger, Rayonier is not

 

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permitted to pay any dividends on or make any distributions other than its regular cash dividends not to exceed $0.27 per share. Pursuant to the merger agreement, Rayonier and Pope will coordinate with the other with respect to the declaration of any dividend in respect of Rayonier shares or Pope units and the record dates and payment dates relating thereto, in order to ensure that Pope unitholders shall not receive both a distribution from Pope and a dividend from Rayonier, or fail to receive one dividend, in any calendar quarter with respect to their Pope units and any Rayonier shares that any such holder receives in exchange therefor in the merger.

See the section entitled “Comparative Per Share Market Price and Dividend Information” beginning on page 63 for a comparison of the historical dividend practices of the two companies.

 

Q:

Why am I being asked to consider and vote on a proposal to approve, by advisory (non-binding) vote, the merger-related executive compensation?

 

A:

Under SEC rules, Pope is required to seek an advisory (non-binding) vote with respect to the compensation that may be paid or become payable to its named executive officers that is based on, or otherwise relates to, the merger.

 

Q:

What will happen if Pope unitholders do not approve the compensation proposal?

 

A:

Approval of the compensation that may be paid or become payable to Pope’s named executive officers that is based on, or otherwise relates to, the merger is not a condition to completion of the merger. The vote is an advisory vote and will not be binding on Pope or the surviving company in the merger. If the merger is completed, the merger-related executive compensation may be paid to Pope’s named executive officers to the extent payable in accordance with the terms of their compensation agreements and arrangements even if Pope unitholders do not approve, by advisory (non-binding) vote, the merger-related executive compensation.

 

Q:

Do any of Pope’s directors or executive officers have interests in the merger that may differ from those of Pope unitholders?

 

A:

Pope’s directors and executive officers have certain interests in the merger that may be different from, or in addition to, the interests of Pope unitholders generally. The Pope board was aware of and considered these interests, among other matters, in evaluating the merger agreement and the mergers and in recommending that Pope unitholders approve the merger agreement. For a description of these interests, refer to the section entitled “Interests of Pope’s Directors and Executive Officers in the Merger” beginning on page 154.

 

Q:

If my Pope units are held in “street name” by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee automatically vote those shares for me?

 

A:

Your bank, brokerage firm or other nominee will only be permitted to vote your Pope units if you instruct your bank, brokerage firm or other nominee how to vote. You should follow the procedures provided by your bank, brokerage firm or other nominee regarding the voting of your Pope units.

Banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect to non-routine matters, such as the approval of the merger agreement, the proposal to approve, by advisory (non-binding) vote, the merger-related executive compensation and adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement. As a result, absent specific instructions from the beneficial owner of such units, banks, brokerage firms and other nominees are not empowered to vote such units. A so-called “broker non-vote” results when banks, brokerage firms and other nominees return a valid proxy but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such units.

 

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If you do not instruct your broker on how you wish your units to be voted this will not be counted as “FOR” the merger and will (i) have the same effect as a vote against the merger agreement and the merger, (ii) will not have an effect on the advisory (non-binding) vote to approve the merger-related executive compensation except to the extent it results in there being insufficient Pope units present at the special meeting to establish a quorum and (iii) not have an effect on the vote to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

 

Q:

When and where is the special meeting?

 

A:

The special meeting will be held on [                    ], at [            ] local time, at [            ]. To attend the special meeting in person, an admission card or proof of ownership of Pope units and limited partner status as of the record date is required. All Pope unitholders planning to attend the special meeting can request an admission card and register to attend by contacting the Pope Investor Relations Department at (360) 697-6626. Admission to the special meeting is limited to Pope unitholders as of the record date.

 

Q:

How many votes do I have?

 

A:

Each Pope unitholder is entitled to one vote for each unit of Pope held of record as of the record date.

As of the close of business on the record date, there were [                ] Pope units outstanding. As summarized above, there are some important distinctions between Pope units held of record and those owned beneficially in street name as well as some important distinctions between how your Pope units will be voted if you are a limited partner or an assignee.

 

Q:

What constitutes a quorum for the special meeting?

 

A:

The presence, in person or represented by proxy, of the limited partners of record holding more than 50% of the Pope units held by all limited partners of record (including those held by MGP, in its capacity as limited partner of record for all Pope units held by assignees).

 

Q:

How do I vote if I am a record holder, Pope assignee or my units are held in street name?

 

A:

Unitholder of Record. If you are a unitholder of record, you can vote in the following ways:

 

   

By Internet: by following the Internet voting instructions on the proxy card at any time up until [            ] on [                    ]. If you vote by Internet, you need not return your proxy card;

 

   

By Telephone: by following the telephone voting instructions included in the proxy card at any time up until [            ] on [                    ]. If you vote by telephone, you need not return your proxy card; or

 

   

By Mail: by completing, signing and dating the enclosed proxy card and returning it in the self-addressed envelope provided with the proxy materials. You must sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as an officer of a corporation, executor or trustee), you must indicate your name and title.

Pope assignee. If you are a Pope assignee, i.e. you hold Pope units but have not been admitted to Pope as a limited partner, you can vote by completing, signing and dating the proxy card, indicating therein you are a Pope assignee and returning it in the self-addressed envelope provided with the proxy materials. You must sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as an officer of a corporation, executor or trustee), you must indicate your name and title.

Beneficial Owner. If your units are held in street name, your plan trustee or your bank, broker or other nominee should give you instructions for voting your Pope units.

If you satisfy the admission requirements to the special meeting, as described above under the heading “When and where is the special meeting?” you may vote your units in person at the meeting. If you decide

 

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to attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. Even if you plan to attend the special meeting, you are encouraged to vote in advance by Internet, telephone or mail so that your vote will be counted in the event you later decide not to attend the special meeting.

 

Q:

How can I change or revoke my vote?

 

A:

If you are a unitholder of record, you may change your vote or revoke your proxy by:

 

   

executing and delivering to Pope’s executive offices, to the attention of Pope’s corporate secretary, or transfer agent, Computershare, a proxy card relating to the same units bearing a later date than the original proxy card;

 

   

giving notice of revocation in writing to the Pope secretary, at 19950 Seventh Avenue NE, Suite 200, Poulsbo, Washington 98370 (by mail or overnight delivery), prior to the time the special meeting begins; or

 

   

voting in person at the special meeting.

Please note, however, that under the rules of the national stock exchanges, any Pope unitholder whose units are held in street name by a member brokerage firm may revoke his, her or its proxy and vote his, her or its units in person at the special meeting only in accordance with applicable rules and procedures of those exchanges, as employed by the street name holder’s brokerage firm. In addition, if you hold your units in street name, you must have a valid proxy from the record holder of the Pope units to vote in person at the special meeting.

 

Q:

If a unitholder gives a proxy, how are the Pope units voted?

 

A:

Regardless of the method you choose to vote, the individuals named on the enclosed proxy card will vote your Pope units in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your Pope units should be voted “FOR” or “AGAINST” or to “ABSTAIN” from voting on all, some or none of the specific items of business to come before the special meeting.

If you properly sign your proxy card but do not mark the boxes showing how your units should be voted on a matter, the Pope units represented by your properly signed proxy will be voted “FOR” the approval of the merger agreement, “FOR” the proposal to approve, by advisory (non-binding) vote, the merger-related executive compensation, and “FOR” adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

If you hold Pope units in “street name” and also directly as a record holder or otherwise or if you hold Pope units in more than one brokerage account, you may receive more than one set of voting materials relating to the special meeting. Please complete, sign, date and return each proxy card (or cast your vote by telephone or Internet as provided on your proxy card) or otherwise follow the voting instructions provided in this proxy statement/prospectus in order to ensure that all of your Pope units are voted. If you hold your units in “street name” through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee to vote your units.

 

Q:

What happens if I sell my Pope units before the special meeting?

 

A:

The record date is earlier than both the date of the special meeting and the merger effective time. If you transfer your Pope units after the record date but before the special meeting, you will, unless the transferee

 

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  requests a proxy from you, retain your right to vote at the special meeting but will transfer the right to receive the per Pope unit merger consideration to the person to whom you transfer your units. In order to receive the per Pope unit merger consideration, you must hold your units at the merger effective time.

 

Q:

Who will solicit and pay the cost of soliciting proxies?

 

A:

Pope has engaged MacKenzie Partners at an estimated cost of $12,500, plus reimbursement of reasonable expenses, to assist in the solicitation of proxies from brokers, nominees, institutions and individuals. Proxies may also be solicited on Pope’s behalf by Pope’s directors, officers or employees (for no additional compensation). Arrangements will also be made with custodians, nominees and fiduciaries for forwarding a notice or printed proxy materials, as applicable, to beneficial owners of units held of record by such custodians, nominees and fiduciaries, and Pope will reimburse such custodians, nominees and fiduciaries for reasonable expenses incurred in connection therewith.

 

Q:

What do I need to do now?

 

A:

Even if you plan to attend the special meeting in person, after carefully reading and considering the information contained in this proxy statement/prospectus, including the annexes attached hereto and other information incorporated herein by reference, please vote promptly to ensure that your units are represented at the special meeting. Each Pope unitholder as of the record date may vote his, her or its Pope units as described above under the heading “How do I vote?”

 

Q:

Where can I find the voting results of the special meeting?

 

A:

The preliminary voting results will be announced at the special meeting. In addition, within four business days following certification of the final voting results, Pope intends to file the final voting results with the SEC on a Current Report on Form 8-K.

 

Q:

Am I entitled to exercise appraisal rights instead of receiving the merger consideration for my units?

 

A:

No. Appraisal rights are not available in connection with the merger under the Delaware Revised Uniform Limited Partnership Act, or the “DRULPA”, under the merger agreement or under the Pope limited partnership agreement. For additional information, please see the merger agreement attached as Annex A to the proxy statement, and Pope limited partnership agreement.

 

Q:

When is the merger expected to be consummated?

 

A:

The parties are working toward consummating the merger as promptly as possible. The parties currently anticipate that the merger will close in the summer of 2020, but the parties cannot be certain when or if the conditions of the merger will be satisfied (or if permissible under applicable law, waived). The merger cannot be consummated until the conditions to closing of the merger are satisfied (or if permissible under applicable law, waived), which conditions include the approval of the merger agreement, the merger and the related transactions by the holders of units at the special meeting and the receipt of certain regulatory approvals.

 

Q:

What effect will the merger have on Pope?

 

A:

If the merger is consummated, Merger Sub 3 will be merged with and into Pope, and Pope will continue to exist following the merger as an indirect wholly owned subsidiary of Rayonier Operating Company LLC. Following the merger effective time, units will no longer be traded on the Nasdaq Capital Market or any other public market, and the registration of units under the Exchange Act will be terminated.

 

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Q:

What happens if the merger is not consummated?

 

A:

In the event that the proposal to approve the merger agreement, the merger and the related transactions are not approved by Pope unitholders, or if the merger is not consummated for any other reason, the Pope unitholders will not receive the merger consideration. Instead, Pope will remain an independent public company and the Pope unitholders will continue to own their Pope units. The Pope units will continue to be registered under the Exchange Act and listed and traded on the Nasdaq Stock Market. Under certain circumstances, if the merger is not consummated, Pope may be obligated to pay to Rayonier a termination fee of $20 million. Please see the section entitled “The Merger Agreement—Termination Fee” beginning on page 152 of this proxy statement/prospectus.

 

Q:

What if I hold depositary receipts?

 

A:

For purposes of this proxy statement and the merger agreement, depositary receipts representing Pope units are treated as indistinguishable from the Pope units themselves, and a unitholder includes a holder of depositary receipts. A holder of depositary receipts may similarly apply to be admitted to Pope as a substituted limited partner by submitting the application included with the proxy card.

 

Q:

Who can help answer my questions?

 

A:

If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact the firm assisting us with the solicitation of proxies, MacKenzie Partners, as follows:

 

   

Unitholders in the U.S. and Canada call toll-free: [            ]

 

   

Unitholders in other locations dial direct: [            ]

 

   

Banks, brokers and other nominees call collect: [            ]

 

Q:

Are there any risks that I should consider in deciding whether to vote for the approval of the merger agreement?

 

A:

Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors” beginning on page 67 of this proxy statement/prospectus. You also should read and carefully consider the risk factors of Rayonier and Pope contained in the documents that are incorporated by reference into this proxy statement/prospectus.

 

Q:

What are the conditions to completion of the merger?

 

A:

In addition to the approval of the merger proposal by Pope unitholders as described above, completion of the merger is subject to the satisfaction of a number of other conditions, including the accuracy of representations and warranties under the merger agreement (subject to the materiality standards set forth in the merger agreement) and Pope’s and Rayonier’s performance of their respective obligations under the merger agreement in all material respects. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the merger, see the section entitled “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 150, of this proxy statement/prospectus.

 

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SUMMARY

The following summary highlights selected information in this proxy statement/prospectus and may not contain all the information that may be important to you as a Pope unitholder. Accordingly, you are encouraged to read carefully this entire proxy statement/prospectus, its annexes and the documents referred to in this proxy statement/prospectus. Each item in this summary includes a page reference directing you to a more complete description of that topic. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions under the section entitled “Where You Can Find More Information” beginning on page 293 of this proxy statement/prospectus.

Parties to the Merger (Page 79)

Rayonier Inc.

1 Rayonier Way

Wildlight, Florida 32097

(904) 357-9100

Rayonier Inc., a North Carolina corporation, is a leading timberland REIT with assets located in some of the most productive softwood timber growing regions in the U.S. and New Zealand. The focus of Rayonier’s business is to invest in timberlands and to actively manage them to provide current income and attractive long-term returns to its shareholders. As of December 31, 2019, Rayonier owned, leased or managed approximately 2.6 million acres of timberlands located in the U.S. South (1.84 million acres), U.S. Pacific Northwest (379,000 acres) and New Zealand (414,000 gross acres, or 295,000 net plantable acres). In addition, Rayonier engages in the trading of logs from New Zealand and Australia to Pacific Rim markets, primarily to support its New Zealand export operations. Rayonier has an added focus to maximize the value of its land portfolio by pursuing higher and better use land sales opportunities to the extent consistent with the provisions of the Code governing REITs.

Rayonier shares are listed on the NYSE under the symbol “RYN.”

Rayonier Operating Company LLC

c/o Rayonier Inc.

1 Rayonier Way

Wildlight, Florida 32097

(904) 357-9100

Rayonier Operating Company LLC, is a Delaware limited liability company and a wholly owned subsidiary of Rayonier. Rayonier Operating Company holds, directly or indirectly, substantially all of Rayonier’s assets and conducts substantially all of Rayonier’s business. Rayonier Operating Company currently does not have any publicly traded equity. Prior to the closing of the merger, Rayonier will contribute all of its interest in Rayonier Operating Company into Rayonier, L.P., which will be the successor in interest to Rayonier Operating Company.

Pacific GP Merger Sub I, LLC

c/o Rayonier Inc.

1 Rayonier Way

Wildlight, Florida 32097

(904) 357-9100

Pacific GP Merger Sub I, LLC, referred to as Merger Sub 1, is a Delaware limited liability company and a wholly owned subsidiary of Rayonier formed solely for the purpose of facilitating the merger of Merger Sub 1 and MGP, referred to as GP merger 1. Merger Sub 1 has not carried on any activities or operations to date, except



 

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for those activities incidental to its formation and undertaken in connection with the transactions contemplated by the merger agreement. By operation of GP merger 1, Merger Sub 1 will be merged with and into MGP, with Merger Sub 1 surviving such merger as a wholly owned subsidiary of Rayonier.

Pacific GP Merger Sub II, LLC

c/o Rayonier Inc.

1 Rayonier Way

Wildlight, Florida 32097

(904) 357-9100

Pacific GP Merger Sub II, LLC, referred to as Merger Sub 2, is a Delaware limited liability company and a wholly owned subsidiary of Rayonier formed solely for the purpose of facilitating the merger of Merger Sub 2 and EGP, referred to as GP merger 2. Merger Sub 2 has not carried on any activities or operations to date, except for those activities incidental to its formation and undertaken in connection with the transactions contemplated by the merger agreement. By operation of GP merger 2, Merger Sub 2 will be merged with and into EGP, with Merger Sub 2 surviving such merger as a wholly owned subsidiary of Rayonier.

Pacific LP Merger Sub III, LLC

c/o Rayonier Inc.

1 Rayonier

Wildlight, Florida 32097

(904) 357-9100

Pacific LP Merger Sub III, LLC, referred to as Merger Sub 3, is a Delaware limited liability company and a wholly owned subsidiary of Rayonier, L.P. formed solely for the purpose of facilitating the merger. Merger Sub 3 has not carried on any activities or operations to date, except for those activities incidental to its formation and undertaken in connection with the transactions contemplated by the merger agreement. By operation of the merger, Merger Sub 3 will be merged with and into Pope, with Pope surviving such merger as a wholly owned subsidiary of Rayonier Operating Partnership.

Pope Resources, a Delaware Limited Partnership

19950 Seventh Avenue NE, Suite

200 Poulsbo, Washington 98370

(360) 697-6626

Pope was formed in 1985 as a result of the spinoff of certain timberlands and development properties from Pope & Talbot, Inc. Pope currently operates in four primary business segments: (1) Partnership Timber, (2) Funds Timber, (3) Timberland Investment Management, and (4) Real Estate. Operations in Pope’s two timber segments consist of growing, managing, harvesting, and marketing timber from Pope’s 119,000 acres of direct timberland ownership, plus another 3,500 acres under timber deeds, in Washington (Partnership Timber) and Pope’s private equity timber funds’ 141,000 acres (as of December 31, 2019) of timberland in Washington, Oregon, and California that Pope co-owns with third-party investors (Funds Timber). Pope’s Timberland Investment Management segment is engaged in organizing and managing private equity timber funds using capital invested by third parties and Pope. Pope’s Real Estate segment’s operations are focused on a portfolio of approximately 1,500 acres in the west Puget Sound region of Washington, most of which are legacy timberlands that have become suitable as development property owing to the expansion of the Puget Sound metropolitan and suburban areas. Recently, Pope has acquired and developed a number of other properties for sale, either independently or by partnering with other experienced real estate developers. This segment’s activities consist of efforts to enhance the value of Pope’s land by obtaining the entitlements and, in some cases, building the infrastructure necessary to enable further development, and then selling those properties, ordinarily to



 

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commercial and residential developers. Pope’s Real Estate operations also include ownership and management of commercial properties, including Port Gamble, Washington, now an historic town. Port Gamble was established by Pope & Talbot in 1853 and was operated as a company town for over 165 years and served as the location for a lumber mill for most of that time. Pope is a publicly traded Delaware master limited partnership, and its units are listed on the Nasdaq Stock Market under the ticker symbol “POPE”. Pope is managed and operated by the officers of, and is subject to the oversight of the board of directors of, MGP. For purposes of this proxy statement, MGP’s officers and board of directors are referred to as Pope’s officers and board of directors, respectively. MGP’s principal executive office is located at 19950 Seventh Avenue NE, Suite 200, Poulsbo, WA 98370, and Pope’s telephone number is +1 (360) 697-6626.

Pope MGP, Inc.

19950 Seventh Avenue NE, Suite 200

Poulsbo, Washington 98370

(360) 697-6626

MGP is a Delaware corporation and serves as Pope’s managing general partner. MGP’s shares are not listed.

Pope EGP, Inc.

19950 Seventh Avenue NE, Suite 200

Poulsbo, Washington 98370

(360) 697-6626

EGP is a Delaware corporation and serves as Pope’s equity general partner. EGP’s shares are not listed.

The Merger and the Merger Agreement (Page 85 and Annex A)

The terms and conditions of the merger are contained in the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus. You are encouraged to read the merger agreement carefully and in its entirety, as it is the legal document that governs the merger and certain of the related transactions.

Pursuant to the merger agreement, three mergers will occur at closing. Merger Sub 1 will merge with and into MGP, with Merger Sub 1 surviving. Merger Sub 2 will merge with and into EGP, with Merger Sub 2 surviving. Merger Sub 3 will merge with and into Pope, with Pope surviving.

Merger Consideration (Page 85)

Each Pope unitholder (other than Rayonier, Opco or certain of their controlled affiliates) may elect to receive, for each Pope unit that they hold, either: (i) $125.00 in cash, referred to as the cash election; (ii) 3.929 Rayonier shares, referred to as the stock election; or (iii) 3.929 Opco units, referred to as the Opco election.

Pope unitholders that do not make a valid election will be treated as if they made the stock election, subject to the proration procedures provided for in the merger agreement.

Pope unitholders’ elections will be subject to proration so that approximately 70% of the Pope units will be exchanged for Rayonier shares or Opco units and approximately 30% of the Pope units will be exchanged for cash. Accordingly, the aggregate amount of Rayonier shares and Opco units, on the one hand, and cash, on the other hand, that will be issued in the merger will equal the amounts issued as if every Pope unit received 2.751 Rayonier shares or Opco units and $37.50 in cash. In the event that the stock election or Opco election is oversubscribed, Rayonier in its sole discretion may increase the amount of Rayonier equity that could be issued in the merger (and correspondingly reduce the amount of cash made available in the merger).



 

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Pope unitholders that make the stock election or Opco election will not receive any fractional Rayonier shares or Opco units in connection with the merger. Each such Pope unitholder who otherwise would be entitled to receive a fraction of a Rayonier share or Opco unit pursuant to the merger will be paid an amount in cash (without interest) equal to such fractional part of a Rayonier share or Opco unit multiplied by the volume weighted average closing sale price per Rayonier share as reported on the NYSE as reported by Bloomberg, L.P. for the 10 consecutive trading days immediately preceding the date which is five trading days immediately prior to the closing date.

Elections and Proration (Page 86)

By indicating their elections in the applicable section of the letter of election and transmittal, Pope unitholders may elect to receive the cash election consideration, stock election consideration or Opco election consideration in exchange for each Pope unit for which a valid election is made, subject in each case to the election procedures and proration procedures described in this proxy statement/prospectus and the related letter of election and transmittal. Pope unitholders that do not make a valid election will treated as if they made the stock election, subject to the proration procedures provided for in the merger agreement.

Treatment of Pope Equity Compensation (Page 134)

Treatment of Restricted Pope Units

Outstanding restricted Pope units will be converted into restricted Rayonier shares on substantially the same terms as the existing restricted Pope units, except that the number of restricted Rayonier shares issued will be the number of restricted Pope units multiplied by 3.929. As discussed in “Interests of Pope’s Directors and Executive Officers in the Merger – Treatment of Equity and Equity-Based Awards” beginning at page 154, Pope directors and some executive employees of Pope hold restricted Pope units that will experience accelerated vesting in connection with or following the merger.

Treatment of Pope Equity Plans

Rayonier will assume all of the obligations outstanding under Pope’s existing equity plans, including the treatment of the converted equity awards upon a qualifying termination (as discussed in “Interests of Pope’s Directors and Executive Officers in the Merger – Treatment of Equity and Equity-Based Awards” beginning at page 154).

Financing of the Merger (Page 88)

Rayonier currently expects to finance the transactions contemplated by the merger agreement, including the merger, through a combination of cash on hand, borrowings under Rayonier’s existing credit agreement, dated as of August 5, 2015, among Rayonier, the subsidiary borrowers from time to time party thereto, the lenders from time to time party thereto, and CoBank, ACB, as administrative agent, referred to as the revolving credit facility, and issuances of Rayonier shares and Opco units. Rayonier, subject to market conditions, may also consider financing all or a portion of the cash consideration payable in connection with the merger through new debt financing.

Accounting Treatment (Page 88)

Rayonier prepares its financial statements in accordance with accounting principles generally accepted in the United States, referred to as GAAP. The merger will be accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Rayonier will be treated as the acquiror for accounting purposes.



 

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Recommendation of the Pope Special Committee; Recommendation of the Pope Board of Directors; Pope’s Reasons for the Merger (Page 117)

On January 14, 2020, the Pope special committee, after receiving advice from Pope’s management and the Pope special committee’s outside financial and legal advisors, and after due and careful consideration, including of the terms and conditions of the merger agreement, the merger and the related transactions, unanimously (i) determined that the merger agreement, the merger and the related transactions were advisable and in the best interests of Pope and the unaffiliated Pope unitholders, (ii) approved the merger agreement and the consummation by Pope of the merger and the related transactions and (iii) recommended that the Pope board (A) approve the merger agreement and the consummation by Pope of the merger and the related transactions, (B) submit the merger agreement to the Pope unitholders for approval and (C) recommend that the Pope unitholders approve the merger agreement, the merger and the related transactions.

On January 14, 2020, the Pope board, after receiving advice from Pope’s management and its outside legal advisors and acting upon the recommendation of the Pope special committee, and after due and careful consideration, including of the terms and conditions of the merger agreement, the merger and the related transactions, unanimously (i) determined that the execution, delivery and performance of the merger agreement by Pope and the consummation by Pope of the merger and the related transactions were advisable to and in the best interests of Pope, (ii) authorized and approved the execution, delivery and performance by Pope of the merger agreement and the consummation by Pope of the merger and the related transactions (subject to receipt of the Pope unitholder approval), (iii) recommended that the Pope unitholders approve the merger agreement, the merger and the related transactions and (iv) resolved to submit the merger agreement to a vote at a meeting of the Pope unitholders and recommend approval of the merger agreement by the Pope unitholders.

The Pope board therefore recommends a vote “FOR” the proposal to approve the merger agreement, the merger and the related transactions. The Pope board also recommends a vote “FOR” the nonbinding compensation proposal and “FOR” the adjournment proposal.

Certain factors considered by the Pope special committee and the Pope board in reaching their decisions to approve the merger agreement, the merger and the related transactions are described in the section entitled “The Merger – Recommendation of the Pope Special Committee; Recommendation of the Pope Board of Directors; Pope’s Reasons for the Merger,” beginning on page 117.

Opinion of the Pope Special Committee’s Financial Advisor (Page 123 and Annex E)

The Pope special committee retained Centerview Partners LLC, referred to in this proxy statement/prospectus as “Centerview,” as financial advisor to the Pope special committee in connection with a review of potential strategic options, including the proposed merger and the related transactions, which are collectively referred to as the “transaction” throughout this section and the summary of Centerview’s opinion below under the caption “Opinion of the Pope Special Committee’s Financial Advisor.” In connection with this engagement, the Pope special committee requested that Centerview evaluate the fairness, from a financial point of view, of the merger to the Pope unitholders (other than the affiliated Pope unitholders). For purposes of this proxy statement/prospectus “affiliated Pope unitholders” means (a) MGP, EGP, the holders of MGP common stock, the holders of EGP common stock and their respective affiliates and (b) Rayonier, Rayonier, L.P. and their respective affiliates. On January 13, 2020, at a meeting of the Pope special committee held to evaluate the transaction, Centerview rendered to the Pope special committee its oral opinion, which was subsequently confirmed by delivery of a written opinion dated January 14, 2020, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the merger consideration proposed to be paid to the Pope unitholders (other than the affiliated Pope unitholders) pursuant to the merger agreement was fair, from a financial point of view, to such unitholders.



 

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The full text of Centerview’s written opinion, dated January 14, 2020, which describes the assumptions made, procedures followed, matters considered and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex E and is incorporated herein by reference. Centerview’s financial advisory services and opinion were provided for the information and assistance of the Pope special committee (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the transaction and Centerview’s opinion addressed only the fairness, from a financial point of view, as of the date thereof, to the Pope unitholders (other than affiliated Pope unitholders) of the merger consideration to be paid to such holders pursuant to the merger agreement. Centerview’s opinion did not address any other term or aspect of the merger agreement or the transaction and does not constitute a recommendation to any holder of Pope units or any other person as to how such holder or other person should vote with respect to the transaction or otherwise act with respect to the transaction or any other matter, including without limitation whether any such holder of Pope units should elect to receive the cash election consideration, stock election consideration or the Opco election consideration or make no election with respect to the merger.

The full text of Centerview’s written opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.

For further information, see the section of this proxy statement/prospectus entitled “Opinion of the Pope Special Committee’s Financial Advisor” beginning on page 123 and Annex E to this proxy statement/prospectus.

Information About Pope Meeting (Page 82)

The special meeting will be held on [        ], at [        ] local time, at [        ]. At the special meeting, the Pope unitholders will be asked to consider and vote upon (i) a proposal to approve the merger agreement, the merger and the related transactions, (ii) a proposal to approve, by advisory (non-binding) vote, the merger-related executive compensation and (iii) a proposal for adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

Record Date and Quorum (Page 82)

You are entitled to receive notice of, and to vote at, the special meeting if you are an owner of record of Pope units as of the close of business on [            ], 2020, the record date. On the record date, there were [                ] Pope units outstanding and entitled to vote. You will have one vote on all matters properly coming before the special meeting for each Pope unit that you owned on the record date.

The presence, in person or represented by proxy, of holders of a majority of all of the outstanding Pope units entitled to vote at the special meeting constitutes a quorum for the purposes of the special meeting.

Vote Required (Page 82)

Approval of the merger proposal requires that a majority of the Pope units issued and outstanding as of the record date vote in favor of approval of the merger agreement.

If you fail to submit a proxy or to vote in person at the special meeting, or if you abstain, or if you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will not be counted as “FOR” or “AGAINST” and will have the same effect as a vote against the merger agreement and the merger.

The proposal to approve the merger-related executive compensation requires that a majority of the votes cast at the special meeting are voted in favor of the proposal; however, such vote is advisory (non-binding) only.



 

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If you fail to submit a proxy or to vote in person at the special meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will not be counted as “FOR” or “AGAINST” and will not have an effect on the approval of the merger-related executive compensation proposal except to the extent it results in there being insufficient Pope units present at the special meeting to establish a quorum.

The approval of adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement requires that a majority of the votes cast at the special meeting are voted in favor of the proposal, whether or not a quorum is present. If you fail to submit a proxy or to vote in person at the special meeting, or abstain, or you do not provide your bank, brokerage firm or other nominee with instructions, as applicable, this will not be counted as “FOR” or “AGAINST” and will not have an effect on the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger agreement.

Proxies and Revocations (Page 82)

Any Pope unitholder of record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet, by returning the enclosed proxy card in the accompanying prepaid reply envelope or may vote in person by appearing at the special meeting.

If your Pope units are held in “street name” through a bank, brokerage firm or other nominee, you should instruct your bank, brokerage firm or other nominee on how to vote your Pope units using the instructions provided by your bank, brokerage firm or other nominee.

If you are a Pope assignee, i.e. you hold Pope units but have not been admitted to Pope as a limited partner, you can vote by completing, signing and dating the proxy card, indicating therein you are a Pope assignee and returning it in the self-addressed envelope provided with the proxy materials.

You have the right to revoke a proxy, whether delivered over the Internet, by telephone or by mail, at any time before it is exercised, by (i) executing and delivering to the Pope secretary or transfer agent a proxy card relating to the same units bearing a later date than the original proxy card, (ii) if you are a unitholder of record or, if you are a beneficial owner, have a “legal proxy” from your bank, brokerage firm or other nominee that holds your units, attending the special meeting and voting in person, or (iii) giving written notice of revocation to the Pope secretary, at 19950 Seventh Avenue NE, Suite 200, Poulsbo, Washington 98370, prior to the time the special meeting begins.

Voting Agreements with Certain Pope Unitholders (Page 134)

Concurrently with the execution of the merger agreement, Rayonier entered into a voting and support agreement with Maria M. Pope and certain of her affiliates, a copy of which is attached to this proxy statement/prospectus as Annex B, and a voting and support agreement with Gordon P. Andrews and certain of his affiliates, a copy of which is attached as Annex C, referred to individually as a “support agreement” and collectively as the “support agreements”, pursuant to which each of the named Pope unitholders have agreed, among other matters and upon the terms and subject to the conditions set forth in the relevant support agreement, to vote all of their Pope units in favor of the merger agreement and the transactions contemplated thereby, including the merger, and against any proposal that would reasonably be expected to (i) result in a breach of any covenant, representation or warranty or any other obligation of Pope contained in the merger agreement or (ii) prevent or impede, interfere with, delay, postpone or adversely affect the consummation of the transactions contemplated by the merger agreement, including the merger. As of the date of this proxy statement/prospectus, the named Pope unitholders



 

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hold [                ] Pope units (excluding the Pope units held by MGP and EGP) in the aggregate, or approximately [    ] % of the voting power of Pope as of the date of this proxy statement/prospectus.

Interests of Pope’s Directors and Executive Officers in the Merger (Page 154)

Directors and executive officers of Pope have certain interests in the merger agreement and transactions contemplated thereby, including the merger, that may be different from or in addition to the interests of Pope unitholders generally. These interests include, among others, the cash consideration payable in connection with the GP mergers, potential severance benefits and other payments, the treatment of outstanding unit awards pursuant to the merger agreement and rights to ongoing indemnification and insurance coverage by the surviving company for acts or omissions occurring prior to the merger. The Pope board and the Pope special committee was aware of and considered those interests, among other matters, in reaching its decisions to (i) approve the merger and the other transactions contemplated thereby, (ii) approve and declare advisable the merger agreement, and (iii) resolve to recommend the approval of the merger agreement to Pope unitholders.

Regulatory Approvals (Page 134)

Completion of the merger is conditioned upon, among other things, the expiration or early termination of the applicable waiting period under the HSR Act. Rayonier and Pope each filed their respective HSR Act notification forms on February 5, 2020 and received notice of early termination on February 26, 2020.

Each of Rayonier and Pope has agreed to use their respective reasonable best efforts to promptly take, or cause to be taken (including by their respective subsidiaries) any actions necessary to avoid or eliminate each and every impediment under the HSR Act or any other antitrust law and obtain the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable (and in any event no later than the October 14, 2020, as such date may be extended in accordance with the merger agreement), including making agreements to (i) hold separate or divest any property, assets or businesses, (ii) take or commit to take any action that limits their respective freedom of action with respect to, or their ability to retain, any property, assets or businesses, and (iii) to initiate or defend against any lawsuit, action or proceeding challenging the merger agreement or the transactions contemplated thereby, except Rayonier is not required to take, and Pope without Rayonier’s written consent cannot take, the actions described in (i) and (ii) above if those actions would reasonably be expected to have a material adverse effect on either Pope and its subsidiaries taken as a whole or Rayonier and its subsidiaries taken as a whole.

No Appraisal Rights

The Pope unitholders are not entitled to dissenters’ or appraisal rights in connection with the merger.

Conditions to Completion of the Merger (Page 150)

In addition to the approval of the merger agreement by Pope unitholders and the expiration or termination of the applicable waiting period under the HSR Act, each as described above, each party’s obligation to complete the merger is also subject to the satisfaction or waiver (to the extent permitted under applicable law) of certain other conditions, including the effectiveness of the registration statement on Form S-4 of which this proxy statement/prospectus forms a part (and the absence of any stop order, or pending proceedings seeking a stop order, by the SEC), approval of the listing on the NYSE of the Rayonier shares to be issued in the merger, the continued effectiveness of the written consents of the general partner stockholders in respect of the GP mergers, the absence of an injunction prohibiting the merger, the receipt of certain tax opinions, the accuracy of the representations and warranties of the other party under the merger agreement (generally subject to the materiality standards set forth in the merger agreement), the performance in all material respects by the other party of its respective covenants and obligations under the merger agreement and delivery of officer certificates by the other party certifying satisfaction of the two preceding conditions.



 

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The parties cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

No Solicitation (Page 144)

As more fully described in this proxy statement/prospectus and in the merger agreement, and subject to the exceptions summarized below, Pope, MGP and EGP agree that they will not, will cause their subsidiaries not to, and will instruct and use their reasonable best efforts to cause their respective directors, officers, employees and other representatives not to, directly or indirectly, (i) initiate, solicit, knowingly encourage or knowingly facilitate the submission of any alternative proposal or any inquiry, proposal or offer that could reasonably be expected to lead to an alternative proposal, or (ii) enter into or participate in any discussions or negotiations regarding, or furnish to any person any non-public information with respect to, or that could reasonably be expected to lead to, any alternative proposal.

Under the terms of the merger agreement, Pope, MGP and EGP each agreed to immediately cease any discussions or negotiations with any person that may have been ongoing with respect to any alternative proposal as of January 14, 2020.

If, prior to obtaining the Pope unitholder approval, following the receipt of a bona fide written alternative proposal that was not solicited in violation of the terms of the merger agreement, the Pope board determines in good faith, after consultation with its outside financial advisor and outside legal counsel, that such proposal is or could reasonably be expected to lead to, a superior proposal, the Pope board may, in response to such a proposal, furnish information with respect to Pope to the person making such a proposal and engage in discussions or negotiations with such person, except that prior to furnishing any such nonpublic information relating to Pope or entering into negotiations, Pope must give Rayonier written notice of the person making the proposal, execute with that person a confidentiality agreement with terms no less favorable in the aggregate to Pope than the provisions of the confidentiality agreement in effect between Rayonier and Pope, and provide Rayonier with any non-public information about Pope that Pope had not previously provided to Rayonier.

No Change in Recommendation or Entry into Alternative Acquisition Agreement (Page 145)

Subject to certain exceptions described below, the Pope board may not:

 

   

effect a Pope board change in recommendation; or

 

   

cause or permit Pope or any of its subsidiaries to enter into a merger agreement, acquisition agreement, memorandum of understanding, option agreement or other similar agreements providing for, with respect to, or in connection with an alternative proposal;

Fiduciary Termination Right

However, at any time before the Pope unitholder approval is obtained, if (i) an unsolicited written alternative proposal is made by a third-party, which was not solicited in violation of the merger agreement and is not withdrawn; or an intervening event (as defined in the merger agreement) occurs; (ii) in the case of an alternative proposal, the Pope board concludes in good faith, after consultation with its outside legal counsel and outside financial advisors, that such proposal constitutes a superior proposal (as defined in the merger agreement); and (iii) the Pope board concludes in good faith, after consultation with Pope’s outside legal counsel, that the failure to effect a partnership change in recommendation would be reasonably likely to be inconsistent with its duties under Delaware law and the Pope limited partnership agreement, then, subject to the provisions described in the next paragraph, the Pope board may effect a partnership change in recommendation.



 

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Prior to making any Pope board change in recommendation, the Pope board must (i) provide Rayonier at least three business days’ prior written notice of its intention to effect a partnership change in recommendation (including, in the case of an alternative proposal, copies of the proposed definitive agreement providing for the alternative proposal) and (ii) negotiate in good faith with Rayonier regarding any adjustments to the terms and conditions of the merger agreement so that, as applicable, the alternative proposal ceases to constitute a superior proposal or the intervening event ceases to require a partnership change in recommendation (in each case, in the reasonable determination of the Pope board, after consultation with its financial advisor and outside legal counsel).

Whether or not there is a partnership change in recommendation, unless the merger agreement is terminated in accordance with its terms, the Pope board must submit the merger agreement for approval by Pope unitholders at the special meeting.

Termination of the Merger Agreement (Page 152)

Termination Rights

The merger agreement may be terminated and the merger abandoned at any time prior to closing, whether before or after any approval of the merger by the Pope unitholders, in the following ways:

 

   

by mutual written consent of Pope and Rayonier;

 

   

by Rayonier if the written consents of the stockholders of MGP and EGP to GP merger 1 and GP merger 2, respectively, are not delivered to Rayonier within 24 hours after the execution of the merger agreement;

 

   

by either Rayonier or Pope if there is in effect a final non-appealable order of a governmental authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by the merger agreement. However, Pope or Rayonier will not be able to terminate the merger agreement for the above reason if such order was primarily due to the failure of such party to perform its obligations under the merger agreement;

 

   

by either Pope or Rayonier if the other party has materially breached or materially failed to perform any representations, warranties, covenants or agreements contained in the merger agreement and such breach or failure (i) would result in the failure of specified conditions to closing and (ii) is not curable or, if capable of being cured, is not cured by the earlier of the outside date or within 30 days following receipt by the breaching party of notice by the other party of such breach or failure. However, Pope or Rayonier will not be able to terminate the merger agreement for the above reason if such party is then in material breach of any of its representations, warranties, covenants or agreements under the merger agreement;

 

   

by either Pope or Rayonier if closing does not occur by October 14, 2020, referred to as the outside date, which date shall automatically be extended to January 14, 2021 if as of the initial outside date all of the conditions to closing shall have been satisfied or waived (or capable of being satisfied) except for conditions in respect of receipt of required regulatory approvals. However, Pope or Rayonier will not be able to terminate the merger agreement for the above reason so long as the failure to close by the outside date is the result of such party’s failure to perform or comply in all material respects with its obligations under the merger agreement;

 

   

by either Pope or Rayonier if the special meeting has concluded and the Pope unitholder approval has not been obtained;

 

   

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by either Pope or Rayonier if after all conditions to closing the merger have been satisfied and the closing of the merger has not occurred within three business days of those requirements being satisfied, such party has provided five business days’ notice that it is prepared to close the merger and the other party fails to close within such five business day period.

Termination Fee

Pope will pay Rayonier a termination fee of $20 million if the merger agreement is terminated in certain circumstances involving a Pope board change in recommendation occurring or other circumstances involving Pope accepting an alternative proposal.

In no event will the termination fee be payable more than once.

U.S. Federal Income Tax Consequences (Page 163)

Although for state law purposes Pope will become a wholly owned subsidiary of Rayonier, L.P. in the merger, for U.S. federal income tax purposes Rayonier, L.P. will be treated as a continuation of Pope (and Rayonier, L.P. will cease to exist) following the merger pursuant to U.S. Treasury regulations promulgated under Section 708 of the Code.

As a result, U.S. holders (as defined in the discussion under the heading “Material U.S. Federal Income Tax Consequences of the Merger”) that receive Opco units in the merger should not recognize any income, gain or loss with respect to the Opco units that they receive as part of the exchange, except to the extent that any net decrease in such holder’s share of partnership liabilities pursuant to Section 752 of the Code attributable to such U.S. Holder’s Pope units exchanged for Opco units exceeds such holder’s adjusted tax basis in the Pope units exchanged therefor at the closing of the merger. However, it is not anticipated that gain or loss should generally be recognized by a U.S. holder solely as a result of a decrease in such holder’s share of partnership liabilities. A U.S. holder that receives Opco units in the merger will recognize gain to the extent that the amount of cash received in lieu of fractional units (if any) exceeds such holder’s adjusted tax basis allocable to such portion of Pope units sold.

On the other hand, the merger will be a taxable transaction for any U.S. holder that receives cash or Rayonier shares. Each U.S. holder who receives cash or Rayonier shares (and any cash it receives in lieu of fractional Rayonier shares) in exchange for its Pope units pursuant to the merger will recognize gain or loss in an amount equal to the difference between (1) the sum of (A) the amount of any cash received, (B) the fair market value of the Rayonier shares received and (C) such U.S. holder’s share of Pope’s liabilities immediately prior to the merger effective time attributable to such U.S. holder’s Pope units exchanged for cash and/or Rayonier shares and (2) such U.S. holder’s adjusted tax basis in Pope units exchanged therefor (which includes such U.S. holder’s share of Pope’s liabilities attributable to such Pope units immediately prior to the merger effective time). Gain or loss recognized by a U.S. holder will generally be taxable as capital gain or loss. However, a portion of this gain or loss, which portion could be substantial, will be separately computed and taxed as ordinary income or loss under Section 751 of the Code to the extent attributable to assets giving rise to depreciation recapture or other “unrealized receivables” or to “inventory items” owned by Pope and its subsidiaries.

The U.S. federal income tax consequences of the merger to a U.S. holder will depend on such holder’s own personal tax situation. Accordingly, you are encouraged to consult your own tax advisor for a full understanding of the particular tax consequences of the merger. In addition, please read the discussion under the heading “Material U.S. Federal Income Tax Consequences of the Merger—Tax Consequences of the Merger to U.S. Holders.”



 

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Comparison of Unitholders’/Shareholders’ Rights (Page 285)

The rights of Pope unitholders are governed by the Pope limited partnership agreement and by Delaware law, including the DRULPA. Should you elect to or you do receive Rayonier shares, your rights as a shareholder of Rayonier will be governed by Rayonier’s amended and restated articles of incorporation and by-laws, referred to as the Rayonier charter and the Rayonier by-laws, respectively, and by North Carolina corporate law, including the North Carolina Business Corporation Act, or the NCBCA. Your rights under the Rayonier charter and Rayonier by-laws will differ in some respects from your rights under the Pope limited partnership agreement. Likewise, if you elect to receive Opco units, your rights as a unitholder of Rayonier, L.P. will be governed by the limited partnership agreement of Rayonier, L.P. that will be adopted prior to the merger. Your rights under the Rayonier, L.P. limited partnership agreement will different in some respects from your rights under the Pope limited partnership agreement.

Risk Factors (Page 67)

You should consider all the information contained in or incorporated by reference into this proxy statement/prospectus in deciding how to vote for the proposals presented in this proxy statement/prospectus. In particular, you should consider the factors described under “Risk Factors.”



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF RAYONIER INC.

The following table presents selected historical consolidated financial data for Rayonier as of and for the years ended December 31, 2019, 2018, 2017, 2016 and 2015. This information has been derived from Rayonier’s audited consolidated financial statements.

The information should be read in conjunction with the historical audited consolidated financial statements of Rayonier and the related notes, including those contained in its Annual Report on Form 10-K for the year ended December 31, 2019, and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for such Annual Report that is incorporated by reference into this proxy statement/prospectus.

For more information, see the section entitled “Where You Can Find More Information” beginning on page 293 of this proxy statement/prospectus.

 

     As of and For the Year Ended December 31,  
($ in millions except per share data)    2019     2018     2017     2016     2015  

Statement of Income Data:

          

Revenues

   $ 711.556   $ 816.138   $ 819.596   $ 815.915   $ 568.800

Cost of Sales

     (558.350     (605.259     (568.253     (526.439     (441.718
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Margin

     21.53     25.84     30.67     35.48     22.34

Selling and Administrative Expense

     (41.646     (41.951     (40.245     (42.785     (45.750

Other Operating Income (Expense)

     (4.533     1.140     4.393     9.086     (3.548
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Costs and Expenses

     (604.529     (646.070     (604.105     (560.138     (491.016

Operating Income

     107.027     170.068     215.491     255.777     77.784

Interest Expense

     (31.716     (32.066     (34.071     (32.245     (31.699

Interest Income

     5.307     4.564     1.840     (0.698     (3.003
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense), Net

     (26.409     (27.502     (32.231     (32.943     (34.702

Income Before Income Taxes

     80.618     142.566     183.260     222.834     43.082

Income Tax Provision

     (12.940     (25.236     (21.681     (5.064     0.859
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive Income

     36.809     97.970     176.178     252.447     4.462
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive Income Attributable to Rayonier Inc.

   $ 27.663   $ 89.039   $ 161.403   $ 242.892   $ 17.489
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Per Common Share Data:

          

Basic Earnings Per Share

   $ 0.46   $ 0.79     $ 1.17     $ 1.73     $ 0.37  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted Earnings Per Share

   $ 0.46   $ 0.79   $ 1.16   $ 1.73   $ 0.37
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance Sheet Data:

          

Total Current Assets

   $ 125.975   $ 207.853   $ 183.527   $ 164.804   $ 105.685

Total Assets

     2,860.996     2,780.666     2,858.481     2,685.760     2,315.938

Total Current Liabilities

     151.186     63.541     68.548     91.966     59.457

Total Long-Term Debt

     973.129     972.567     1,022.004     1,030.205     830.554

Total Shareholder’s Equity and Noncontrolling Interests

     1,537.642     1,654.550     1,692.940     1,496.752     1,361.740


 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF RAYONIER OPERATING COMPANY LLC

The following table presents selected historical consolidated financial data for Rayonier Operating Company LLC, as predecessor-in interest to Rayonier, L.P., as of and for the years ended December 31, 2019, 2018, 2017, 2016 and 2015. This information has been derived from Rayonier’s and Rayonier Operating Company LLC’s audited consolidated financial statements.

The information should be read in conjunction with the historical audited consolidated financial statements of Rayonier Operating Company LLC and the related notes elsewhere in this proxy statement/prospectus and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this proxy statement/prospectus starting at page 228.

 

     As of and For the Year Ended December 31,  
($ in millions)    2019     2018     2017     2016     2015  

Statement of Income Data:

          

Revenues

   $ 711.556   $ 816.138   $ 819.596   $ 815.915   $ 568.800

Cost of Sales

     (558.350     (605.259     (568.253     (526.439     (441.718
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Margin

     21.53     25.84     30.67     35.48     22.34

Selling and Administrative Expense

     (41.646     (41.951     (40.245     (42.785     (45.750

Other Operating Income (Expense)

     (4.533     1.152     4.393     9.086     (3.548
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Costs and Expenses

     (604.529     (646.058     (604.105     (560.138     (491.016

Operating Income

     107.027     170.080     215.491     255.777     77.784

Interest Expense

     (19.160     (27.498     (32.548     (29.984     (28.473

Interest Income

     7.134     5.904     3.194     0.984     (1.315
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense), Net

     (12.026     (21.594     (29.354     (29.000     (29.788

Income Before Income Taxes

     95.001     148.486     186.137     226.777     47.996

Income Tax Provision

     (12.940     (25.236     (21.681     (5.064     0.859
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive Income

     51.192     103.890     179.055     256.390     9.376  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive Income Attributable to Rayonier Operating Company LLC

   $ 42.046   $ 94.959   $ 164.280   $ 246.835     $ (3.651
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance Sheet Data:

          

Total Current Assets

   $ 125.674   $ 207.492   $ 134.963   $ 143.351     $ 103.214  

Total Assets

     2,860.695     2,780.303     2,809.915     2,664.305       2,313.465  

Total Current Liabilities

     148.143     60.493     124.721     137.106       93.694

Total Long-Term Debt

     648.958     648.764     1,007.285     1,015.530     772.572  

Total Member’s Equity and Noncontrolling Interests

     1,864.555     1,981.038     1,611.920     1,453.832     1,392.012  


 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF POPE

The following table presents selected historical consolidated financial data for Pope as of and for the years ended December 31, 2019, 2018, 2017, 2016, and 2015. This information has been derived from Pope’s audited financial statements.

You should read this information in conjunction with Pope’s consolidated financial statements and related notes thereto included in Pope’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for each such Annual Report, each of which is incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 293 of this proxy statement/prospectus.

 

     As of and For the Year Ended December 31,  
($ in millions except per unit data)    2019     2018     2017     2016     2015  

Statement of Income Data:

          

Revenues

   $ 109.903     $ 103.554     $ 99.823     $ 80.428     $ 78.028  

Cost of Sales

     (79.184     (58.087     (57.984     (47.273     (46.604
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Margin

     27.95     43.91     41.91     41.22     40.27

Selling and Administrative Expense

     (12.139     (7.217     (5.742     (5.076     (4.972

Total Operating Costs and Expenses

     (34.804     (32.831     (24.334     (28.529     (19.644
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

     (3.998     12.636       30.052       5.621       10.677  

Interest Expense

     (5.800     (5.322     (4.965     (4.150     (3.854

Interest Income

     0.003       0.132       0.003       0.011       0.024  

Other Income (Expense), Net

     (5.797     (4.895     (4.471     (3.406     (2.970
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income Before Income Taxes

     (9.795     7.741       25.581       2.215       7.707  

Income Tax Provision

     (0.159     (0.104     (1.176     (0.252     (0.207
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive Income

     (9.954     7.637       24.405       1.963       7.500  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive Income Attributable to Unitholders

   $ 2.435     $ 6.821     $ 17.891     $ 5.942     $ 10.943  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Per Common Unit Data:

          

Basic Earnings Per Unit

   $ 0.52     $ 1.54     $ 4.10     $ 1.35     $ 2.51  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted Earnings Per Unit

   $ 0.52     $ 1.54     $ 4.10     $ 1.35     $ 2.51  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance Sheet Data:

          

Total Current Assets

   $ 17.011     $ 20.366     $ 18.030     $ 32.206     $ 17.396  

Total Assets

     493.549       508.249       380.673       399.050       370.056  

Total Current Liabilities

     36.714       9.981       9.762       21.048       16.740  

Total Long-Term Debt

     128.751       151.241       127.328       125.291       84.537  

Total Partners’ Capital and Noncontrolling Interests

     318.993       338.600       240.626       248.464       263.066  


 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following table shows selected unaudited pro forma condensed consolidated financial information about the combined financial condition and operating results of Rayonier and Pope after giving effect to the merger. The unaudited pro forma condensed consolidated financial information assumes that the merger is accounted for as a business combination with Rayonier treated as the acquirer. The unaudited pro forma condensed consolidated balance sheet data has been prepared as if the merger occurred on December 31, 2019. The unaudited pro forma condensed consolidated statement of operations data has been prepared as if the merger had occurred on January 1, 2019. The summary unaudited pro forma condensed consolidated financial information listed below has been derived from and should be read in conjunction with (i) the more detailed unaudited pro forma condensed combined financial statements, including the notes thereto, appearing elsewhere in this proxy statement/prospectus and (ii) the condensed consolidated financial statements and the related notes of both Rayonier and Pope contained in their respective Annual Reports on Form 10-K for the year ended December 31, 2019, all of which are incorporated by reference into this proxy statement/prospectus. For more information, see “Unaudited Pro Forma Condensed Combined Financial Data” and “Where You Can Find More Information.”

The unaudited pro forma condensed consolidated financial information is presented for illustrative purposes only and is not necessarily indicative of the combined operating results or financial position that would have occurred if the merger had been consummated on the dates indicated and in accordance with the assumptions described herein, nor is it necessarily indicative of the future operating results or financial position of the combined company. The unaudited pro forma condensed consolidated statement of operations data does not give effect to any transaction or integration costs relating to the merger. In addition, as explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial information, the preliminary allocation of the pro forma purchase price reflected in the unaudited pro forma condensed consolidated financial information is subject to adjustment and may vary significantly from the definitive allocation of the final purchase price that will be recorded subsequent to completion of the merger. The determination of the final purchase price will be based on the number of Pope units outstanding and the trading price of Rayonier shares at closing.



 

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COMPARATIVE PER SHARE DATA

The following tables set forth historical per share or unit information of Rayonier and Pope, respectively, and preliminary unaudited pro forma condensed combined per share information after giving effect to the merger with Pope by Rayonier under the acquisition method of accounting. You should not rely on this information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that Rayonier will experience after the acquisition of Pope. The preliminary unaudited pro forma condensed combined per share data has been derived from and should be read in conjunction with the “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 33 and the related notes included in this proxy statement/prospectus beginning on page 35. The historical per share or unit data has been derived from the historical consolidated financial statements of Rayonier and Pope as of and for the periods indicated, incorporated by reference in this proxy statement/prospectus.

 

     Year Ended
December 31,
2019
 

Rayonier Historical Per Share Data

  

Earnings per share—basic

   $ 0.46  

Earnings per share—diluted

   $ 0.46  

Cash dividends declared per common share

   $ 1.08  

Book value per share

   $ 11.13  

 

     Year Ended
December 31,
2019
 

Pope Historical Per Unit Data

  

Earnings per unit—basic

   $ 0.52  

Earnings per unit—diluted

   $ 0.52  

Cash distributions declared per unit

   $ 4.00  

Book value per unit

   $ 9.90  

 

     Year Ended
December 31,
2019
 

Unaudited Pro Forma Combined Per Share Data for Rayonier

  

Earnings per share—basic

   $ 0.31  

Earnings per share—diluted

   $ 0.31  

Cash dividends declared per common share

   $ 1.08  

Book value per share(1)

   $ 11.86  

 

(1)

Based on the pro ration of cash, Rayonier common stock and Opco units issued in the merger would be equal to the amounts issued if every Pope unit received 2.751 shares of Rayonier common stock and $37.50 in cash.

 

     Year Ended
December 31,
2019
 

Unaudited Pro Forma Combined Per Unit Data for Pope (1)

  

Earnings per unit—basic

   $ 0.86  

Earnings per unit—diluted

   $ 0.86  

Cash dividends declared per unit

   $ 2.97  

Book value per unit

   $ 32.62  

 

(1)

The Pope unaudited pro forma equivalent data was calculated by multiplying the combine company unaudited pro forma data by the share exchange ratio.



 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION – RAYONIER INC.

The following unaudited pro forma condensed combined financial statements as of and for the year ended December 31, 2019 have been prepared (i) as if the merger occurred on December 31, 2019 for purposes of the unaudited pro forma consolidated balance sheet, and (ii) as if the merger occurred on January 1, 2019 for purposes of the unaudited pro forma consolidated statement of operations for the year ended December 31, 2019.

The preliminary fair value of assets acquired and liabilities assumed and related adjustments for the assets acquired and liabilities assumed related to the merger incorporated into the unaudited pro forma condensed consolidated financial statements are based on preliminary estimates and information currently available. The amount of the equity to be issued in connection with the merger and the assignment of fair value to assets and liabilities of Pope have not been finalized and are subject to change. The amount of the equity to be issued in connection with the merger will be based on the number of Pope units outstanding prior to the merger and the elections made by the Pope unitholders pursuant to the merger agreement, and the fair value of the assets and liabilities assumed will be based on the actual net tangible and intangible assets and liabilities of Pope that exist on the effective date of the merger.

Actual amounts recorded in connection with the merger may change based on any increases or decreases in the fair value of the assets acquired and liabilities assumed upon the completion of the final valuation and may result in variances to the amounts presented in the unaudited pro forma consolidated balance sheet and/or unaudited pro forma consolidated statement of operations. Assumptions and estimates underlying the adjustments to the unaudited pro forma condensed consolidated financial statements are described in the accompanying notes. These adjustments are based on available information and assumptions that management of Rayonier considered to be reasonable. The unaudited pro forma condensed consolidated financial statements do not purport to: (1) represent Rayonier’s actual financial position had the merger occurred on December 31, 2019; (2) represent the results of Rayonier’s operations that would have actually occurred had the merger occurred on January 1, 2019; or (3) project Rayonier’s financial position or results of operations as of any future date or for any future period, as applicable.

The unaudited pro forma condensed consolidated financial statements have been developed from, and should be read in conjunction with, the audited financial statements of Rayonier and accompanying notes thereto included in Rayonier’s Annual report filed on Form 10-K for the year ended December 31, 2019, incorporated herein by reference, the audited financial statements of Rayonier Operating Company LLC and accompanying notes thereto included elsewhere in this proxy statement/prospectus, the audited financial statements of Pope and accompanying notes thereto included in Pope’s Annual Report on Form 10-K for the year ended December 31, 2019, incorporated herein by reference, and the accompanying notes to the unaudited pro forma condensed combined financial statements.



 

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Unaudited Pro Forma Condensed Combined Balance Sheet

As of December 31, 2019

(Dollars in millions, except per share amounts)

 

     Historical
Rayonier
    Historical
Pope
Resources
    Pro Forma
Merger
Adjustments
           Pro Forma
Funding
Adjustments
           Pro
Forma
Combined
 

ASSETS:

                

Cash and cash equivalents

   $ 68.7     $ 8.2     ($ 273.8     a      $ [—]       a      ($ 196.9

Accounts receivable, net

     27.1       3.8     —            —            30.9

Inventory

     14.5       —         —            —            14.5

Prepaid expenses and other current assets

     15.7       4.2              —            19.9
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

Total current assets

     126.0       16.2       (273.8        [—        (131.6
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

TIMBER AND TIMBERLANDS, NET

     2,482.0       444.3     565.2     b        —            3,491.5

HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS

     81.8       20.2     6.8     c        —            108.8

PROPERTY, PLANT AND EQUIPMENT

                

Total property, plant and equipment, gross

     31.9       13.5     (6.3        —            39.1

Less—accumulated depreciation

     (9.6     (8.2     8.2        —            (9.6
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

Total property, plant & equipment, net

     22.3       5.3       1.9     d        —            29.5

OTHER ASSETS

     148.9       7.5       (12.4     e        —            144.0
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

TOTAL ASSETS

   $ 2,861.0     $ 493.5     $ 287.7        $ [—      $ 3,642.2  

LIABILITIES:

                

Accounts payable

   $ 18.2     $ 1.7       —            —          $ 19.9

Current maturities of long-term debt

     82.0       25.1     (0.1     f        —            107.0

Other current liabilities

     51.0       9.9     29.1     g        —            90.0
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

Total current liabilities

     151.2       36.7     29.0        —            216.9
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS

     973.1       128.8     (96.4     f        [—     f        1,005.5

PENSION AND OTHER POSTRETIREMENT BENEFITS

     25.3       —         —            —            25.3

LONG-TERM LEASE LIABILITY

     90.5       —         —            —            90.5

OTHER NON-CURRENT LIABILITIES

     83.3       9.0     4.9     h        —            97.2
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

TOTAL LIABILITIES

     1,323.4       174.5     (62.5        [—        1,435.4
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

NONCONTROLLING INTEREST IN THE OPERATING PARTNERSHIP

     —         —         134.2     i        —            134.2

EQUITY:

                

GENERAL PARTNERS’ CAPITAL

     —         0.8     (0.8     j        —            —    

LIMITED PARTNERS’ CAPITAL

     —         42.0     (42.0     j        —            —    

SHAREHOLDERS’ EQUITY

                

Common Shares

     888.2       —         124.8     i,j        —            1,013.0

Retained earnings

     583.0       —         (29.1     g,j        —            553.9

Accumulated other comprehensive income

     (31.2     —         —            —            (31.2
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

TOTAL SHAREHOLDERS’ EQUITY

     1,440.0       42.8     52.9     j        —            1,535.7

Noncontrolling interest in consolidated affiliates

     97.6       276.2     163.1     k        —            536.9
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

TOTAL NONCONTROLLING INTEREST AND SHAREHOLDERS’ EQUITY

     1,537.6       319.0     350.2        —            2,206.8
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 
     $2,861.0     $493.5     $287.7            $[—]            $3,642.2  
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 


 

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Unaudited Pro Forma Condensed Combined Statements of Income

For the Year Ended December 31, 2019

(Dollars in millions, except per share amounts)

 

     Historical
Rayonier
    Historical
Pope
Resources
    Pro Forma
Merger
Adjustments
           Pro Forma
Funding
Adjustments
           Pro
Forma
Combined
 

SALES

   $ 711.6     $ 109.9       —            —          $ 821.5
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

Costs and Expenses

                   —    

Cost of sales

     (558.4     (95.1     (25.7     b,c,m        —            (679.2

Selling and general expenses

     (41.7     (17.2     4.5     d,l,n        —            (54.4

Other operating (expense) income, net

     (4.5     (1.6     —            —            (6.1
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 
     (604.6)       (113.9)       (21.2)          —            (739.7)  
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

OPERATING INCOME

     107.0     (4.0     (21.2        —            81.8

Interest expense

     (31.7     (5.8     3.7     o        [—     o        (33.8

Interest and other miscellaneous income, net

     5.3     —         —            —            5.3
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

INCOME BEFORE INCOME TAXES

     80.6     (9.8     (17.5             53.3

Income tax expense

     (12.9     (0.2     —         p        —            (13.1
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

NET INCOME

     67.7     (10.0     (17.5        [—        40.2
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

Less: Net (income) loss attributable to noncontrolling interest in the Operating Partnership

     —         —         (1.8     q        —            (1.8

Less: Net (income) loss attributable to noncontrolling interest in consolidated affiliates

     (8.6     12.4     —            —            3.8
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

NET INCOME ATTRIBUTABLE TO RAYONIER

   $ 59.1     $ 2.4     ($ 19.3        [—      $ 42.2  
  

 

 

   

 

 

   

 

 

      

 

 

      

 

 

 

EARNINGS PER COMMON SHARE

                

Basic earnings per share attributable to Rayonier Inc.

   $ 0.46     $ 0.52              r      $ 0.31  

Diluted earnings per share attributable to Rayonier Inc.

   $ 0.46     $ 0.52              r      $ 0.31  

Note 1—Basis of Presentation

The unaudited pro forma condensed combined financial statements are based on Rayonier’s and Pope’s historical consolidated financial statements as adjusted to give effect to the acquisition of Pope and the debt issuance necessary to finance the acquisition. The unaudited pro forma condensed combined statements of income for the year ended December 31, 2019, give effect to the Pope acquisition as if it had occurred on January 1, 2019. The unaudited pro forma condensed combined balance sheet as of December 31, 2019, gives effect to the Pope acquisition as if it had occurred on December 31, 2019.

The historical consolidated financial statements have been adjusted in the pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the business combination, (2) factually supportable and (3) with respect to the pro forma condensed combined statements of income, expected to have a continuing impact on the combined results following the business combination.

The business combination was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. As the acquirer for accounting purposes, Rayonier has estimated the

 

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fair value of Pope’s assets acquired and liabilities assumed and conformed the accounting policies of Pope to its own accounting policies.

The pro forma combined financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

The combined pro forma financial information does not reflect the realization of any expected cost savings or other synergies from the acquisition of Pope as a result of restructuring activities and other planned cost savings initiatives following the completion of the business combination.

Note 2—Pope and Rayonier Reclassification Adjustment

During the preparation of these unaudited pro forma condensed combined financial statements, management performed a preliminary analysis of Pope’s financial information to identify differences in accounting policies as compared to those of Rayonier and differences in financial statement presentation as compared to the presentation of Rayonier. At the time of preparing these unaudited pro forma condensed combined financial statements, Rayonier had not identified all adjustments necessary to conform Pope’s accounting policies to Rayonier’s accounting policies. The below adjustments represent Rayonier’s best estimates based upon the information currently available to Rayonier and could be subject to change once more detailed information is available.

Refer to the table below for a summary of reclassification adjustments made to Pope’s consolidated balance sheet as of December 31, 2019 to conform presentation (in millions):

 

Pope Resources Consolidated

Statement of Financial Position Line
Item

   Rayonier Historical Consolidated
Balance Sheet Line Item
   Pope Resources
Historical

Consolidated
Statement of
Financial Position
     Reclassification
(Rounded)(1)
    Pope Resources
Adjusted

Historical
Consolidated
Balance Sheet
(Unaudited,
Rounded)
 
   Cash and cash equivalents      —        $ 8.2   $ 8.2

Partnership cash

        2.0      (2.0     —    

ORM Timber Funds cash

        6.2      (6.2     —    

Accounts receivable, net

   Accounts receivable, less
allowance for doubtful
accounts
     3.8      —         3.8

Contract assets

        2.8      (2.8     —    

Land held for sale

   Inventory      —          —         —    

Prepaid expenses and other current assets

        1.4      (1.4     —    
   Other current assets      —          4.2     4.2

Timber and roads

        367.3      (367.3     —    

Timberland

        77.0      (77.0     —    
   Timber and Timberlands,
net
     —          444.3     444.3

Land held for development

   Higher and Better Use
Timberlands and Real
Estate Developments
     20.2      —         20.2


 

36


Table of Contents

Pope Resources Consolidated

Statement of Financial Position Line
Item

   Rayonier Historical Consolidated
Balance Sheet Line Item
   Pope Resources
Historical

Consolidated
Statement of
Financial Position
     Reclassification
(Rounded)(1)
    Pope Resources
Adjusted

Historical
Consolidated
Balance Sheet
(Unaudited,
Rounded)
 

Buildings and equipment, net of accumulated depreciation

        5.3      (5.3     —    
   Total property, plant
and equipment, gross
     —          13.5     13.5
   Less—accumulated
depreciation
     —          (8.2     (8.2

Restricted cash

   Restricted cash      0.8      (0.8     —    

Other assets

   Other assets      6.7      0.8     7.5

Accounts payable

   Accounts payable      1.7      —         1.7

Accrued liabilities

        7.2      (7.2     —    

Current portion of long-term debt—Partnership

        0.1      (0.1     —    

Current portion of long-term debt—Funds

        25.0      (25.0     —    
   Current maturities of
long-term debt
     —          25.1     25.1

Deferred revenue

   Deferred revenue      0.2      (0.2     —    

Current portion of environmental remediation liability

        1.1      (1.1     —    

Other current liabilities

   Other current liabilities      1.4      8.5     9.9

Long-term debt, net of unamortized debt issuance costs and current portion—Partnership

        96.4      (96.4     —    

Long-term debt, net of unamortized debt issuance costs—Funds

        32.3      (32.3     —    
   Long-term debt, net of
deferred financing
costs
     —          128.8     128.8
   Long-term lease
liability
     —          —         —    

Environmental remediation and other long term liabilities

   Other non-current
liabilities
     9.0      —         9.0

General Partners’ Capital

        0.8      —         0.8

Limited Partners’ Capital

        42.0      —         42.0

Noncontrolling interest

   Noncontrolling interest      276.2      —         276.2

 

(1)

Reclassifications to conform to Rayonier presentation.



 

37


Table of Contents

Refer to the table below for a summary of reclassification adjustments made to Pope’s consolidated statement of income for the year ended December 31, 2019 to conform presentation:

 

Pope Resources Consolidated

Statement of Income Line Item

  

Rayonier Historical Consolidated
Statement of Income Line Item

   Pope Resources
Historical
Consolidated
Statement
of Income
    Reclassification
(Rounded)(1)
    Pope Resources
Adjusted
Historical
Consolidated
Statement of
Income
(Unaudited,
Rounded)
 

Total revenue

   Sales    $ 109.9     —       $ 109.9

Total cost of sales

   Cost of sales      (79.2     (15.9     (95.1

Partnership Timber Operating expenses

        (5.3     5.3     —    

Funds Timber Operating expenses

        (5.8     5.8     —    

Timberland Investment Management Operating expenses

        (4.9     4.9     —    

Environmental remediation (Real Estate)

        (1.6     1.6     —    

General and Administrative

   Selling and general expenses      (12.1     (5.1     (17.2

Real Estate Operating expenses

        (5.1     5.1     —    

Gain on sale of timberland

        0.1     (0.1     —    
   Other operating (expense) income, net      —         (1.6     (1.6

Interest expense, net

   Interest expense      (5.8     —         (5.8
   Interest and other miscellaneous income, net      —         —         —    

Income tax expense

   Income tax expense      (0.2     —         (0.2

Net and comprehensive (income) loss attributable to noncontrolling interests—ORM Timber Funds

        11.8     (11.8     —    

Net and comprehensive loss attributable to noncontrolling interests—Real Estate

        0.6     (0.6     —    

Net and comprehensive income attributable to unitholders

        2.4     (2.4     —    
   Net income attributable to noncontrolling interest      —         12.4     12.4
   Net Income attributable to shareholders      —         2.4     2.4

 

(1)

Reclassifications to conform to Rayonier presentation.

Note 3—Financing

When its acquisition of Pope closes, the Company will incur approximately [—] in [—] fixed-rate debt, less [—] in debt issuance costs, a portion of which will be used to fund the cash component of the acquisition for approximately $168 million. The Company also will extinguish Pope’s existing debt of approximately $106 million which includes a $9.2 million prepayment premium. In this case, the Company does not legally assume Pope’s outstanding debt.



 

38


Table of Contents

Note 4 – Consideration

Estimated consideration of approximately $543 million is based on Rayonier’s closing share price of $23.21 on March 13, 2020. The value of purchase price consideration will change based on fluctuations in the share price of Rayonier’s common stock and the number of Pope units outstanding on the closing date.

The following table summarizes the components of the estimated consideration (in millions):

 

Cash consideration:

     

Pope units as of December 31, 2019

     4.3   

Less: Pope units held by Rayonier(1)

     (0.1   
  

 

 

    

Units outstanding, net

     4.2   

Cash consideration (per Pope unit)

   $ 37.50   
        157.6

General Partner interest

        10.0
     

 

 

 
        167.6
     

 

 

 

Equity consideration:

     

Pope units as of December 31, 2019

     4.3   

Less: Pope units held by Rayonier(1)

     (0.1   
  

 

 

    

Units outstanding, net

     4.2   

Exchange ratio

     2.751   
  

 

 

    

Rayonier common shares/units to be issued

     11.6   

Rayonier share price (2)

   $ 23.21   
        268.4
     

 

 

 

Total estimated consideration to Pope unit holders

        436.0
     

 

 

 

Estimated repayment of Pope debt

        97.0

Estimated repayment premium on Pope debt

        9.2

Fair value of replacement Rayonier restricted stock units for vested Pope awards

        1.1
     

 

 

 

Total pro forma purchase price

      $ 543.3
     

 

 

 

 

 

(1)

As of December 31, 2019, Rayonier held 114,400 Pope limited partnership units as marketable securities on its standalone financial statements. As a North Carolina corporation, Rayonier does not have or present treasury stock on its consolidated balance sheet. Accordingly, the Rayonier common shares acquired will be retired on the Merger date.

(2)

The estimated purchase price is based on the closing price of Rayonier common stock on March 13, 2020, the latest practicable date prior to the date of this filing. Pursuant to accounting rules, the final purchase price will be based on the price of the Rayonier common stock as of the closing date, and therefore, will be different from the amount shown above. Based on a sensitivity analysis, a change in the Rayonier common stock price of 10% would result in the following changes in the estimated aggregate consideration:

 

(unaudited, in millions)    Purchase Price  

As presented in pro forma combined results

   $ 543.3

10% increase in common stock price

     570.2

10% decrease in common stock price

     516.5


 

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Table of Contents

Note 5—Preliminary Purchase Price Allocation

Under the acquisition method of accounting, the total purchase price is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the date of the acquisition. The preliminary allocation of the purchase price is based on the terms of the Merger Agreement and Rayonier management’s estimates of the fair value of Pope’s assets and liabilities as of December 31, 2019, derived from the historical balance sheet of Pope as of December 31, 2019 and using the January 14, 2020 Merger Consideration adjusted based on Rayonier’s closing share price of $23.21 on March 13, 2020. As of the date of this document, Rayonier management has not finalized the detailed valuation studies necessary to arrive at the required estimates of the fair value of Pope’s assets acquired and the liabilities assumed and the related allocations of purchase price. The valuation studies are expected to be final by the end of 2020. Additional intangible asset classes may be identified as the valuation process continues. Therefore, the allocation of the purchase price to assets acquired and liabilities assumed is based on preliminary fair value estimates and is subject to final analysis by Rayonier management.

The following table summarizes the allocation of the preliminary purchase price as December 31, 2019, with the excess recorded as goodwill (in millions):

 

Timberland and Real Estate Business

  

Cash

   $ 2.0

Other current assets

     3.0

Timber and timberland

     464.1

Land held for development

     27.0

Buildings and equipment

     7.4

Other assets

     5.7

Goodwill (1)

     —    

Other current liabilities

     (8.1

Environmental liabilities

     (10.1

Other non-current liabilities(2)

     (3.9

Less: noncontrolling interest

     (3.3
  

 

 

 

Pro forma purchase price

     483.8
  

 

 

 

Timber Fund Business

  

Cash

     6.2

Other current assets

     4.9

Timber and timberland

     545.4

Goodwill(1)

     —    

Current portion of long-term debt

     (25.0

Other current liabilities

     (3.5

Long-term debt

     (32.4

Less: noncontrolling interest

     (436.1
  

 

 

 

Pro forma purchase price

     59.5
  

 

 

 

Total pro forma purchase price

   $ 543.3
  

 

 

 

 

 

(1)

Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment at least annually, or more frequently if circumstances indicate potential impairment.



 

40


Table of Contents
(2)

Other non-current liabilities includes a $3.9 million deferred income tax liability resulting from the preliminary fair value adjustment to Pope’s assets and liabilities.

Note 6—Pro forma adjustments

The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information (in millions):

 

  a.

The following represents the pro forma adjustments to cash and cash equivalents as a result of the merger:

 

Decrease from extinguishment of existing Pope debt(1)

   ($ 106.2

Decrease from cash consideration paid to Pope
unit holders(2)

     (167.6
  

 

 

 

Pro forma adjustment to cash and cash equivalents

   ($ 273.8
  

 

 

 

 

 

(1)

Includes $9.2 million prepayment premium.

(2)

Estimated based on the pro ration of cash, Rayonier common stock and Opco units issued in the merger would be equal to the amounts issued if every Pope unit received 2.751 shares of Rayonier common stock or Opco units and $37.50 in cash.

The following represents the pro forma adjustments to cash and cash equivalents as a result of the debt financing:

 

Issuance of new debt, net of debt issuance costs

   [—]
  

 

Pro forma adjustment to cash and cash equivalents

   $[—]
  

 

 

  b.

Reflects the adjustment of $565.2 million to increase the basis in the acquired Timber and Timberlands to estimated fair value of $1,009.5 million. In determining the fair value of the timberlands, the Company utilized valuation methodologies including a discounted cash flow analysis. The fair value calculations are preliminary and subject to change after the Company finalizes its review of the specific types, nature, age, condition and location of Pope’s timberlands. The following summarizes the changes in the estimated depletion expense (in millions):

 

Estimated depletion expense

   ($ 175.0

Historical depletion expense

     154.0
  

 

 

 

Pro forma adjustment to depletion expense

   ($ 21.0
  

 

 

 


 

41


Table of Contents
  c.

Reflects the adjustment of $6.8 million to increase the basis in the acquired real estate development investments to estimated fair value of $27.0 million. In determining the fair value of the real estate development investments, the Company utilized valuation methodologies including sales comparison and a discounted cash flow analysis. The fair value calculations are preliminary and subject to change after the Company finalizes its review of the specific types, nature, age, condition and location of Pope’s real estate development investments. The following summarizes the changes in the estimated Non-cash cost of land and improved development expense (in millions):

 

Estimated non-cash cost of land and improved development

   ($ 26.5

Historical non-cash cost of land and improved development

     21.8
  

 

 

 

Pro forma adjustment to non-cash cost of land and improved development

   ($ 4.7
  

 

 

 

 

  d.

Reflects the adjustment of $1.9 million to increase the basis in the acquired property, plant and equipment to estimated fair value of $7.4 million. In determining the fair value of the property, plant and equipment the Company utilized valuation methodologies including a sales comparison approach. The fair value calculations are preliminary and subject to change after the Company finalizes its review of the specific types, nature, age, condition and location of Pope’s property, buildings and equipment. The following summarizes the changes in the estimated depreciation expense (in millions):

 

Estimated depreciation expense

   ($ 2.5

Historical depreciation expense

     2.3  
  

 

 

 

Pro forma adjustment to depreciation expense

   ($ 0.2
  

 

 

 

 

  e.

At the time of this filing, the Company has not performed a detailed valuation analysis of Pope’s intangible assets. Consequently, the fair value and estimated useful lives will likely differ from final amounts the Company will calculate after completing a detailed valuation analysis, and the difference could have a material impact on the accompanying unaudited pro forma condensed combined financial statements.

The following represents the pro forma adjustments to other assets (in millions):

 

Exchange of Pope units held by Rayonier for common shares(1)

   ($ 10.6

Decrease in investment in joint venture

     (1.8
  

 

 

 

Pro forma adjustment to other assets

   ($ 12.4
  

 

 

 

 

 

(1)

As a North Carolina corporation, Rayonier does not have or present treasury stock on its consolidated balance sheet. Accordingly, the Rayonier common shares acquired will be retired on the Merger date.

 

  f.

Reflects the effects of extinguishing Pope’s outstanding debt upon completion of the acquisition. The net decrease to debt includes (in millions):

 

Decrease from extinguishment of existing Pope debt

   ($ 97.0

Increase from elimination of Pope’s debt issuance costs

     0.5

Plus: Pro forma adjustments current portion of long-term debt

     0.1
  

 

 

 

Pro forma adjustment to long-term debt

   ($ 96.4
  

 

 

 


 

42


Table of Contents

Rayonier has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the fair value adjustment of assumed Timber Fund debt and related amortization. Accordingly, Pope Timber Fund debt is presented at their respective face amounts and should be treated as preliminary fair values.

The following reflects the new term debt incurred to finance the acquisition of Pope (in millions):

 

Issuance of new debt, net of debt issuance costs

     [—
  

 

 

 

Pro forma adjustment to long-term debt

     [—
  

 

 

 

 

  g.

Reflects the accrual of estimated transaction costs of $28.0 million incurred by Rayonier and Pope directly attributable to the Merger. Transaction costs include fees for investment banking, advisory, and other professional fees. Transaction costs are expensed as incurred and accounted for outside of the business combination in the post-acquisition financial statements of the combined entity. As the transaction costs will not have a continuing impact, Rayonier has not shown the estimated transaction costs in the Pro Forma Statements of Operations.

 

      

Additionally, reflects the accrual of an estimated $1.1 million of change in control payment obligation to a Pope executive incurred at the time of the Merger. Pope has previously entered into an original employment contract with an executive officer in which Pope was required to incur severance obligations for matters relating to changes in control, as defined, and involuntary terminations. The Merger met the change in control criteria of the employment agreement. For the severance payment to be made, there must be a change in control and a termination event of the executive, as defined in the employment agreements, referred to as a “double trigger” payment. Since the Pro Forma Balance Sheet assumes the Merger has occurred and the payment will be made to the executive, the obligation has been accrued in the Pro Forma Balance Sheet as of December 31, 2019. Dual trigger payments are accounted for outside of the business combination and not included in the purchase price, instead, recorded as compensation expense in the post-acquisition financial statements of the combined entity. As the change in control payment will not have a continuing impact, Rayonier has not shown this amount in the Pro Forma Statements of Operations.

 

      

The following represents the pro forma adjustments to accrued expenses (in millions):

 

Increase for transaction related expenses

   $ 28.0

Increase for change in control payment obligations

     1.1
  

 

 

 

Pro forma adjustment to accrued expenses

   $ 29.1
  

 

 

 

 

  h.

Reflects the adjustment of $1.0 million to increase the balance in the acquired environmental liabilities to estimated fair value of $10.1 million. In determining the fair value of the environmental liabilities, the Company utilized valuation methodologies including a discounted cash flow analysis. The fair value calculations are preliminary and subject to change after the Company finalizes its review of the specific types, nature, age, condition and location of Pope’s environmental liabilities.

 

      

Additionally, includes a $3.9 million deferred income tax liability resulting from the preliminary fair value adjustment to Pope’s assets and liabilities.

 

      

The following represents the pro forma adjustments to non-current liabilities (in millions):

 

Increase in environmental liabilities

     1.0  

Increase in deferred tax liabilities

     3.9  
  

 

 

 

Pro forma adjustment to non-current liabilities

   $ 4.9  
  

 

 

 


 

43


Table of Contents
  i.

Represents the value of 5,782,052 Rayonier, L.P. units issued at $23.21 per unit (based on Rayonier’s closing share price on March 13, 2020) and 5,782,052 Rayonier common shares issued at $23.21 per share to finance the acquisition. Issuances were estimated based an equivalent election of common share and Opco unit consideration. Limited partner units of Rayonier, L.P. are redeemable for cash (or, at the discretion of Rayonier, for Rayonier shares having an equivalent value) at any time after the merger. Consequently, the units are classified outside of permanent equity on Rayonier’s balance sheet.

 

  j.

The following represents the pro forma adjustments to shareholder’s equity, including the elimination of the historical equity of Pope (in millions):

 

General Partners’ Capital

   ($ 0.8   

Limited Partners’ Capital

     (42.0   
  

 

 

    

Historical Pope Partnership Equity as of December 31, 2019

        (42.8

Decrease for exchange of Pope Resource units for common stock

     (10.6   

Issuance of Rayonier common shares to Pope unit holders (1)

     134.2   

Increase for issuance of Rayonier restricted stock units for Pope’s vested awards

     1.1   
  

 

 

    

Pro forma adjustments to common shares

        124.8

Decrease for transaction-related expenses

     (28.0   

Decrease for change in control payment obligations

     (1.1   
  

 

 

    

Pro forma adjustment to retained earnings

        (29.1
     

 

 

 

Pro forma adjustments to shareholder’s equity

      $ 52.9
     

 

 

 

 

(1)

The estimated value of Rayonier common shares issued is based on an equivalent election of common share and Opco unit consideration and on the closing price of Rayonier common stock on March 13, 2020, the latest practicable date prior to the date of this filing. Pursuant to accounting rules, the value of Rayonier common shares issued will be based on the price of the Rayonier common stock as of the closing date, and therefore, will be different from the amount shown above. Based on a sensitivity analysis, a change in the Rayonier common stock price of 10% would result in the following changes in the value of Rayonier common shares issued:

 

(unaudited, in millions)    Value of
Common
Shares
Issued
 

As presented in pro forma combined results

   $ 134.2

10% increase in common stock price

     147.6

10% decrease in common stock price

     120.8

Based on a sensitivity analysis, a 10% change in assumed election of Rayonier common shares versus Opco units would result in the following changes in the value of Rayonier common shares issued:

 

(unaudited, in millions)    Value of
Common
Shares
Issued
 

As presented in pro forma combined results

   $ 134.2

10% increase in common share elections

     161.0

10% decrease in common share elections

     107.4


 

44


Table of Contents
  k.

Noncontrolling interest in consolidated affiliates represents the third-party ownership interest in the Timber Fund and a real estate investment businesses. Pro forma adjustments reflect the proportionate interests in the fair value of respective identifiable assets and liabilities attributable to each of these businesses.

 

  l.

Represents the difference between Pope’s historical equity compensation expense and the estimated equity compensation expense related to replacement awards issued to continuing employees as part of the acquisition agreement. The fair value of the replacement restricted unit awards will be recognized ratably over the remaining post-combination service periods ranging for one to four years.

The following represents the pro forma adjustments to equity compensation expense (in millions):

 

Pope’s historical equity compensation expense

      ($ 1.2
  

 

 

    

Estimated fair value of replacement restricted awards

     2.5   

Approximate vesting period (in years)

     4     
  

 

 

    
        0.6  
     

 

 

 

Pro forma adjustment to equity compensation expense

      ($ 0.6
     

 

 

 

 

  m.

The following represents the increase in cost of goods sold as a result of increased depletion and non-cash cost of real estate development expense (in millions):

 

Pro forma adjustment to depletion expense

   ($ 21.0

Pro forma adjustment to non-cash cost of land and improved development

     (4.7
  

 

 

 

Pro forma adjustment to cost of goods sold

   ($ 25.7
  

 

 

 

 

  n.

Represents the net change in selling and general administrative expenses as a result of increased depreciation expense and the elimination of Pope’s legal and professional fees related to a strategic evaluation project, which ultimately led to the merger. As the legal and professional expenses are directly attributable to the business combination and will not have a continuing impact, Rayonier has adjusted these expenses in the Pro Forma Statements of Operations.

 

Estimated increase to depreciation expense

   ($ 0.2

Estimated increase to equity compensation expense

     (0.6

Elimination of legal and professional expenses

     5.3  
  

 

 

 

Pro forma adjustment to selling and general expenses

   $ 4.5  
  

 

 

 

 

  o.

The following represents the elimination of interest expense on existing Pope debt (in millions):

 

Elimination of interest expense—Pope debt

   $ 3.7  
  

 

 

 

Pro forma adjustment to interest expense

   $ 3.7  
  

 

 

 

The following represents interest expense on the new term debt to finance the acquisition of Pope and the amortization of related debt issuance costs (in millions):

 

Interest expense on new [—] term debt

     [—

Amortization of new debt issuance costs

     [—
  

 

 

 

Pro forma adjustment to interest expense

     [—
  

 

 

 


 

45


Table of Contents
  p.

Rayonier intends to continue to qualify as a REIT under the requirements of the Code, and as a result, the Company’s direct income tax expense is expected to be minimal. Consequently, no additional adjustment to pro forma income tax expense has been made with respect to the merger. With respect to the merger, Rayonier expects to make taxable REIT subsidiary (“TRS”) elections with respect to the taxable subsidiaries of Pope acquired in the merger (other than the Pope Private REITs) and those subsidiaries therefore will be subject to U.S. federal income taxes at corporate rates. However, no pro forma adjustment for income tax expense has been reflected in the pro forma statement of income as incremental taxable income is projected to be minimal.

 

  q.

Net income attributable to noncontrolling interest in the Operating Partnership is computed by applying the percentage equal to the number of redeemable Opco units divided by the total number of outstanding Opco units and equivalents to the Operating Partnership’s net income after income attributable to noncontrolling interest of consolidating affiliates. The percentage of Opco units has been calculated based on the number of operating units assumed to be outstanding, assuming such operating units were outstanding for the full period presented. See calculation below:

 

Redeemable Opco units outstanding(1)

     5,782,052   

Total units and equivalents outstanding

     140,821,306   
  

 

 

    
        4

Net Income

     40.2   

Less: Net (income) loss attributable to noncontrolling interest in consolidated affiliates

     3.8   
  

 

 

    

Net income attributable to unitholders

      $ 44.0
     

 

 

 

Net Income attributable to noncontrolling interest in the Operating Partnership

      $ 1.8
     

 

 

 

 

 

(1)

The estimated redeemable Opco units outstanding is based on an equivalent election of common share and Opco unit consideration and on the closing price of Rayonier common stock on March 13, 2020, the latest practicable date prior to the date of this filing. Pursuant to accounting rules, the issuance of redeemable Opco units will be based on the price of the Rayonier common stock as of the closing date, and therefore, will be different from the amount shown above.

 

  r.

Pro forma basic earnings per common share attributable to Rayonier has been calculated based on the number of shares assumed to be outstanding, assuming such shares were outstanding for the full period presented. The following table sets forth the computation of unaudited pro forma basic and diluted earnings per share attributable to Rayonier (in millions, except shares and per share data):

 

     Net income
attributable to
Rayonier
     Outstanding
shares
     Per share
amount
 

Earnings per share, basic

   $ 42.2      135,039,254    $ 0.31

Earnings per share, diluted

     42.2      135,380,440    $ 0.31


 

46


Table of Contents

Shares utilized in the calculation of pro forma basic and diluted earnings per share attributable to common stockholders are as follows:

 

     Historical      Shares issued in
the transaction(1)
     Pro Forma
Total
 

Weighted-average shares outstanding, basic

     129,257,202      5,782,052      135,039,254

Weighted-average shares outstanding, diluted

     129,598,388      5,782,052      135,380,440

 

(1)

The estimated issuance of Rayonier common shares is based on an equivalent election of common share and Opco unit consideration. The issuance of Rayonier common shares will be based on actual issuances on the closing date, and therefore, will be different from the amount shown above. Based on a sensitivity analysis, a 10% change in the assumed election of Rayonier common shares and Opco units would result in the following changes in the issuance of Rayonier common shares:

 

     Issuance of
Common
Shares
 

As presented in pro forma combined results

     5,782,052

10% increase in common share elections

     6,938,462

10% decrease in common share elections

     4,625,641


 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION—RAYONIER OPERATING COMPANY LLC

The following unaudited pro forma condensed combined financial statements as of and for the year ended December 31, 2019 have been prepared (i) as if the merger occurred on December 31, 2019 for purposes of the unaudited pro forma consolidated balance sheet, and (ii) as if the merger occurred on January 1, 2019 for purposes of the unaudited pro forma consolidated statement of operations for the year ended December 31, 2019.

The preliminary fair value of assets acquired and liabilities assumed and related adjustments for the assets acquired and liabilities assumed related to the merger incorporated into the unaudited pro forma condensed consolidated financial statements are based on preliminary estimates and information currently available. The amount of the equity to be issued in connection with the merger and the assignment of fair value to assets and liabilities of Pope have not been finalized and are subject to change. The amount of the equity to be issued in connection with the merger will be based on the number of Pope units outstanding prior to the merger and the elections made by the Pope unitholders pursuant to the merger agreement, and the fair value of the assets and liabilities assumed will be based on the actual net tangible and intangible assets and liabilities of Pope that exist on the effective date of the merger.

Actual amounts recorded in connection with the merger may change based on any increases or decreases in the fair value of the assets acquired and liabilities assumed upon the completion of the final valuation and may result in variances to the amounts presented in the unaudited pro forma consolidated balance sheet and/or unaudited pro forma consolidated statement of operations. Assumptions and estimates underlying the adjustments to the unaudited pro forma condensed consolidated financial statements are described in the accompanying notes. These adjustments are based on available information and assumptions that management of Rayonier considered to be reasonable. The unaudited pro forma condensed consolidated financial statements do not purport to: (i) represent Rayonier Operating Company’s actual financial position had the merger occurred on December 31, 2019; (ii) represent the results of Rayonier Operating Company’s operations that would have actually occurred had the merger occurred on January 1, 2019; or (iii) project Rayonier Operating Company’s financial position or results of operations as of any future date or for any future period, as applicable. Rayonier Operating Company historical financials also represent Rayonier, L.P.’s historical financials once Rayonier, L.P. becomes the successor in interest to Rayonier Operating Company LLC prior to the merger.

The unaudited pro forma condensed consolidated financial statements have been developed from, and should be read in conjunction with, the audited financial statements of Rayonier and accompanying notes thereto included in Rayonier’s Annual report filed on Form 10-K for the year ended December 31, 2019, incorporated herein by reference, the audited financial statements of Rayonier Operating Company LLC and accompanying notes thereto included elsewhere in this proxy statement/prospectus, the audited financial statements of Pope and accompanying notes thereto included in Pope’s Annual Report on Form 10-K for the year ended December 31, 2019, incorporated herein by reference, and the accompanying notes to the unaudited pro forma condensed combined financial statements.



 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of December 31, 2019

(Dollars in thousands)

 

    Historical
Rayonier
Operating
Company
          Pro Forma
Rayonier
Contribution
Adjustments(a)
    Historical
Pope
Resources
    Pro Forma
Merger
Adjustments
          Pro Forma
Funding
Adjustments
          Pro
Forma
Rayonier,
L.P.
 

ASSETS:

                 

Cash and cash equivalents

  $ 68.4       $ 0.3     $ 8.2     ($ 273.8     b     $ [—]       b     ($ 196.9

Accounts receivable, net

    27.1       —         3.8     —           —           30.9

Inventory

    14.5       —         —         —           —           14.5

Prepaid expenses and other current assets

    15.7       —         4.2     —           —           19.9
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current assets

    125.7       0.3     16.2       (273.8       [—]         (131.6
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

TIMBER AND TIMBERLANDS, NET

    2,482.0       —         444.3     565.2     c       —           3,491.5

HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS

    81.8       —         20.2     6.8     d       —           108.8

PROPERTY, PLANT AND EQUIPMENT

                 

Total property, plant and equipment, gross

    31.9       —         13.5     (6.3       —           39.1

Less—accumulated depreciation

    (9.6       —         (8.2     8.2       —           (9.6
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total property, plant & equipment, net

    22.3       —         5.3       1.9     e       —           29.5

OTHER ASSETS

    148.9       —         7.5       (12.4     f       —           144.0
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

TOTAL ASSETS

  $ 2,860.7       $ 0.3     $ 493.5     $ 287.7       $ [—]       $ 3,642.2  

LIABILITIES:

                 

Accounts payable

  $ 18.2         —       $ 1.7       —           —         $ 19.9

Current maturities of long-term debt

    82.0       —         25.1     (0.1     g       —           107.0

Other current liabilities

    48.0       3.0     9.9     29.1     h       —           90.0
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current liabilities

    148.2       3.0     36.7     29.0       —           216.9
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS

    648.9       324.2     128.8     (96.4     g       [—]       g       1,005.5

PENSION AND OTHER POSTRETIREMENT BENEFITS

    25.3       —         —         —           —           25.3

LONG-TERM LEASE LIABILITY

    90.5       —         —         —           —           90.5

OTHER NON-CURRENT LIABILITIES

    83.3       —         9.0     4.9     i       —           97.2
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

TOTAL LIABILITIES

    996.2       327.2     174.5     (62.5       [—]         1,435.4
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

REDEEMABLE OPERATING PARTNERSHIP UNITS

    —           —         —         134.2     j       —           134.2

CAPITAL:

                 

General partner’s capital

    —           —         0.8     9.2     k       —           10.0

Limited partner’s capital

    —           —         42.0     1,514.9     k       —           1,556.9

Equity

    1,798.1       (326.9     —         (1,471.2     k       —           —    

Accumulated other comprehensive income

    (31.2       —         —         —           —           (31.2
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

TOTAL CONTROLLING INTEREST CAPITAL

    1,766.9       (326.9     42.8     52.9     k       —           1,535.7

Noncontrolling interest

    97.6       —         276.2     163.1     l       —           536.9
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

TOTAL CAPITAL

    1,864.5       (326.9     319.0     216.0       —           2,072.6
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

TOTAL LIABILITIES, REDEEMABLE OPERATING PARTNERSHIP UNITS AND CAPITAL

  $ 2,860.7       $ 0.3     $ 493.5     $ 287.7     $ [—]       $ 3,642.2
 

 

 

     

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 


 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

For the Year Ended December 31, 2019

(Dollars in thousands)

 

    Historical
Rayonier
Operating
Company
    Pro Forma
Rayonier
Contribution
Adjustments (a)
    Historical
Pope
Resources
    Pro Forma
Merger
Adjustments
          Pro Forma
Funding
Adjustments
          Pro Forma
Rayonier,
L.P.
 

SALES

  $ 711.6      
—  
 
  $ 109.9       —           —         $ 821.5  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Costs and Expenses

                  —    

Cost of sales

    (558.4     —         (95.1     (25.7     c,d,n       —           (679.2

Selling and general expenses

    (41.7     —         (17.2     4.5       e,m,o       —           (54.4

Other operating (expense) income, net

    (4.5     —         (1.6     —           —           (6.1
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 
    (604.5           (113.9     (21.2       —           (739.6
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

OPERATING INCOME

    107.0       —         (4.0     (21.2       —           81.8  

Interest expense

    (19.1     (12.6     (5.8     3.7       p       [—]       p       (33.8

Interest and other miscellaneous income, net

    7.1       (1.8     —         —           —           5.3  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

INCOME BEFORE INCOME TAXES

    95.0       (14.4     (9.8     (17.5       [—]         53.3  

Income tax expense

    (12.9     —         (0.2     —         q       —           (13.1
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

NET INCOME

    82.1       (14.4     (10.0     (17.5       [—]         40.2  

Less: Net (income) loss attributable to noncontrolling interest in consolidated affiliates

    (8.6     —         12.4       —           —           3.8  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

NET INCOME AVAILABLE TO UNITHOLDERS

  $ 73.5     ($ 14.4   $ 2.4     ($ 17.5       [—]       $ 44.0  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

EARNINGS PER UNIT

               

Net income available for unitholders— basic

      $ 0.52             r     $ 0.31  

Net income available for unitholders—diluted

      $ 0.52             r     $ 0.31  

Note 1—Basis of Presentation

The unaudited pro forma condensed combined financial statements are based on Rayonier Operating Company’s and Pope’s historical consolidated financial statements as adjusted to give effect to the acquisition of Pope, the debt issuance necessary to finance the acquisition and the contribution of Rayonier Operating Company to a new limited partnership (Rayonier, L.P.), resulting in the new limited partnership becoming the obligor of existing bonds issued by Rayonier Inc. The unaudited pro forma condensed combined statements of income for the year ended December 31, 2019, give effect to the Pope acquisition as if it had occurred on January 1, 2019. The unaudited pro forma condensed combined balance sheet as of December 31, 2019, gives effect to the Pope acquisition as if it had occurred on December 31, 2019.

The historical consolidated financial statements have been adjusted in the pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the business combination, (2) factually supportable and (3) with respect to the pro forma condensed combined statements of income, expected to have a continuing impact on the combined results following the business combination.

The business combination was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. As the acquirer for accounting purposes, Rayonier Operating Company has estimated the fair value of Pope’s assets acquired and liabilities assumed and conformed the accounting policies of Pope to its own accounting policies.



 

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The pro forma combined financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

The combined pro forma financial information does not reflect the realization of any expected cost savings or other synergies from the acquisition of Pope as a result of restructuring activities and other planned cost savings initiatives following the completion of the business combination.

Note 2—Pope and Rayonier Operating Company Reclassification Adjustment

During the preparation of these unaudited pro forma condensed combined financial statements, management performed a preliminary analysis of Pope’s financial information to identify differences in accounting policies as compared to those of Rayonier Operating Company and differences in financial statement presentation as compared to the presentation of Rayonier Operating Company. At the time of preparing these unaudited pro forma condensed combined financial statements, Rayonier Operating Company had not identified all adjustments necessary to conform Pope’s accounting policies to Rayonier Operating Company’s accounting policies. The below adjustments represent Rayonier Operating Company’s best estimates based upon the information currently available to management and could be subject to change once more detailed information is available.

Refer to the table below for a summary of reclassification adjustments made to Pope’s consolidated balance sheet as of December 31, 2019 to conform presentation (in millions):

 

Pope Resources
Consolidated Statement of
Financial Position Line
Item

  

Rayonier Operating

Company Historical
Consolidated Balance Sheet Line Item

   Pope
Resources
Historical
Consolidated
Statement of
Financial

Position
     Reclassification
(Rounded)(1)
    Pope
Resources
Adjusted

Historical
Consolidated
Balance
Sheet
(Unaudited,
Rounded)
 
   Cash and cash equivalents      —         $ 8.2   $ 8.2

Partnership cash

        2.0      (2.0     —     

ORM Timber Funds cash

        6.2      (6.2     —     

Accounts receivable, net

   Accounts receivable, less allowance for doubtful accounts      3.8      —          3.8

Contract assets

        2.8      (2.8  

Land held for sale

   Inventory      —           —          —     

Prepaid expenses and other current assets

        1.1      (1.1     —     
   Other current assets         3.9     3.9

Timber and roads

        367.3      (367.3     —     

Timberland

        77.0      (77.0     —     
   Timber and Timberlands, net         444.3     444.3

Land held for development

   Higher and Better Use Timberlands and Real Estate Developments      20.2        20.2

Buildings and equipment, net of accumulated depreciation

        5.3      (5.3     —     
   Total property, plant and equipment, gross         13.6     13.6
   Less—accumulated depreciation         (8.2     (8.2

Restricted cash

   Restricted cash      0.8      (0.8     —     


 

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Table of Contents

Pope Resources
Consolidated Statement of
Financial Position Line
Item

  

Rayonier Operating

Company Historical
Consolidated Balance Sheet Line Item

   Pope
Resources
Historical
Consolidated
Statement of
Financial

Position
     Reclassification
(Rounded)(1)
    Pope
Resources
Adjusted

Historical
Consolidated
Balance
Sheet
(Unaudited,
Rounded)
 

Other assets

   Other assets      6.6      0.8     7.4

Accounts payable

   Accounts payable      1.7      —          1.7

Accrued liabilities

        6.9      (6.9     —     

Current portion of long-term debt—Partnership

        0.1      (0.1     —     

Current portion of long-term debt—Funds

        25.0      (25.0     —     
   Current maturities of long-term debt      —           25.1     25.1

Deferred revenue

   Deferred revenue      0.2      (0.2     —     

Current portion of environmental remediation liability

        1.1      (1.1     —     

Other current liabilities

   Other current liabilities      1.4      8.2     9.6

Long-term debt, net of unamortized debt issuance costs and current portion—Partnership

        96.4      (96.4     —     

Long-term debt, net of unamortized debt issuance costs—Funds

        32.3      (32.3     —     
   Long-term debt, net of deferred financing costs         128.8     128.8
   Long-term lease liability      —           —          —     

Environmental remediation and other long term liabilities

   Other non-current liabilities      9.0        —          9.0  

General Partners’ Capital

        0.8      —          0.8

Limited Partners’ Capital

        42.0      —          42.0

Noncontrolling interest

   Noncontrolling interest      276.2      —          276.2

 

(1)

Reclassifications to conform to Rayonier Operating Company presentation.



 

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Refer to the table below for a summary of reclassification adjustments made to Pope’s consolidated statement of income for the year ended December 31, 2019 to conform presentation:

 

Pope Resources
Consolidated Statement of
Income Line Item

  

Rayonier Operating
Company Historical
Consolidated Statement of
Income Line Items

  

Pope
Resources
Historical
Consolidated
Statement of
Income

   

Reclassification
(Rounded)(1)

   

Pope
Resources
Adjusted
Historical
Consolidated
Statement
of Income
(Unaudited,
Rounded)

 

Total revenue

   Sales    $ 109.9     —        $ 109.9

Total cost of sales

   Cost of sales      (79.2     (15.9     (95.1

Partnership Timber Operating expenses

        (5.3     5.3     —     

Funds Timber Operating expenses

        (5.8     5.8     —     

Timberland Investment Management Operating expenses

        (4.9     4.9     —     

Environmental remediation (Real Estate)

        (1.6     1.6     —     

General and Administrative

   Selling and general expenses      (12.1     (5.1     (17.2

Real Estate Operating expenses

        (5.1     5.1     —     

Gain on sale of timberland

        0.1     (0.1     —     
   Other operating (expense) income, net      —          (1.6     (1.6

Interest expense, net

   Interest expense      (5.8     —          (5.8
   Interest and other miscellaneous income, net      —          —          —     

Income tax expense

   Income tax expense      (0.2     —          (0.2

Net and comprehensive (income) loss attributable to noncontrolling interests—ORM Timber Funds

        11.8     (11.8     —     

Net and comprehensive loss attributable to noncontrolling interests—Real Estate

        0.6     (0.6     —     

Net and comprehensive income attributable to unitholders

        2.4     (2.4     —     
   Net income attributable to noncontrolling interest      —          12.4     12.4
   Net Income attributable to shareholders      —          2.4     2.4

 

(1)

Reclassifications to conform to Rayonier Operating Company presentation.



 

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Note 3—Financing

When its acquisition of Pope closes, the Company will incur approximately [—] in [—] fixed-rate debt, less [—] in debt issuance costs, a portion of which will be used to fund the cash component of the acquisition for approximately $168 million. The Company also will extinguish Pope’s existing debt of approximately $106 million which includes a $9.2 million prepayment premium. In this case, the Company does not legally assume Pope’s outstanding debt.

Note 4—Consideration

Estimated consideration of approximately $543 million is based on Rayonier’s closing share price of $23.21 on March 13, 2020. The value of purchase price consideration will change based on fluctuations in the share price of Rayonier’s common stock and the number of Pope units outstanding on the closing date.

The following table summarizes the components of the estimated consideration (in millions):

 

Cash consideration:

    

Pope units as of December 31, 2019

     4.3  

Less: Pope units held by Rayonier Operating Company(1)

     (0.1  
  

 

 

   

Units outstanding, net

     4.2  

Cash consideration (per Pope unit)

   $ 37.50  
       157.6

General Partner interest

       10.0
    

 

 

 
       167.6
    

 

 

 

Equity consideration:

    

Pope units as of December 31, 2019

     4.3  

Less: Pope units held by Rayonier Operating Company(1)

     (0.1  
  

 

 

   

Units outstanding, net

     4.2  

Exchange ratio

     2.751  
  

 

 

   

Rayonier common shares/units to be issued

     11.6  

Rayonier share price(2)

   $ 23.21  
       268.4
    

 

 

 

Total estimated consideration to Pope unit holders

       436.0
    

 

 

 

Estimated repayment of Pope debt

       97.0

Estimated repayment premium on Pope debt

       9.2

Fair value of replacement Rayonier restricted stock units for vested Pope awards

       1.1
    

 

 

 

Total pro forma purchase price

     $ 543.3
    

 

 

 

 

(1)

As of December 31, 2019, Rayonier Operating Company holds 114,400 Pope limited partnership units as marketable securities on its standalone financial statements. Rayonier Operating Company intends to exchange its Pope units for Rayonier Inc. common shares. As a North Carolina corporation, Rayonier Inc. does not have or present treasury stock on its consolidated balance sheet. Accordingly, the Rayonier Inc. common shares acquired will be retired on the Merger date.



 

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Table of Contents
(2)

The estimated purchase price is based on the closing price of Rayonier Inc. common stock on March 13, 2020, the latest practicable date prior to the date of this filing. Pursuant to accounting rules, the final purchase price will be based on the price of the Rayonier Inc. common stock as of the closing date, and therefore, will be different from the amount shown above. Based on a sensitivity analysis, a change in the Rayonier common stock price of 10% would result in the following changes in the estimated aggregate consideration:

 

(unaudited, in thousands)

   Purchase
Price
 

As presented in pro forma combined results

   $ 543.3

10% increase in common stock price

     570.2

10% decrease in common stock price

     516.5

Note 5—Preliminary Purchase Price Allocation

Under the acquisition method of accounting, the total purchase price is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the date of the acquisition. The preliminary allocation of the purchase price is based on the terms of the Merger Agreement and Rayonier Operating Company management’s estimates of the fair value of Pope’s assets and liabilities as of December 31, 2019, derived from the historical balance sheet of Pope as of December 31, 2019 and using the January 14, 2020 Merger Consideration adjusted based on Rayonier’s closing share price of $23.21 on March 13, 2020. As of the date of this document, Rayonier Operating Company management has not finalized the detailed valuation studies necessary to arrive at the required estimates of the fair value of Pope’s assets acquired and the liabilities assumed and the related allocations of purchase price. The valuation studies are expected to be final by the end of 2020. Additional intangible asset classes may be identified as the valuation process continues. Therefore, the allocation of the purchase price to assets acquired and liabilities assumed is based on preliminary fair value estimates and is subject to final analysis by Rayonier Operating Company management.

The following table summarizes the allocation of the preliminary purchase price as December 31, 2019, with the excess recorded as goodwill (in millions):

 

Timberland and Real Estate Business

  

Cash

     2.0

Other current assets

     3.0

Timber and timberland

     464.1

Land held for development

     27.0

Buildings and equipment

     7.4

Other assets

     5.7

Goodwill(1)

     —    

Other current liabilities

     (8.1

Environmental liabilities

     (10.1

Other non-current liabilities(2)

     (3.9

Less: noncontrolling interest

     (3.3
  

 

 

 

Pro forma purchase price

     483.8
  

 

 

 


 

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Table of Contents

Timber Fund Business

  

Cash

     6.2

Other current assets

     4.9

Timber and timberland

     545.4

Goodwill(1)

     —    

Current portion of long-term debt

     (25.0

Other current liabilities

     (3.5

Long-term debt

     (32.4

Less: noncontrolling interest

     (436.1
  

 

 

 

Pro forma purchase price

     59.5
  

 

 

 

Total pro forma purchase price

   $ 543.3
  

 

 

 

 

(1)

Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized but is tested for impairment at least annually, or more frequently if circumstances indicate potential impairment.

(2)

Non-current liabilities includes a $3.9 million deferred income tax liability resulting from the preliminary fair value adjustment to Pope’s assets and liabilities.

Note 6—Pro forma adjustments

The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information (in millions):

 

  a.

As part of the merger, Rayonier Inc. will contribute 100% of its interest in Rayonier Operating Company to a new limited partnership (Rayonier, L.P.). Additionally, Rayonier, L.P. will become the obligor of existing bonds issued by Rayonier Inc. The following represents the pro forma adjustments for the contribution:

 

Cash and cash equivalents

     0.3   
  

 

 

    

Total assets

        0.3

Accrued interest on Senior Notes(1)

     3.0   

Senior Notes,(1) net of deferred financing costs

     324.2   
  

 

 

    

Total liabilities

        327.2
     

 

 

 

Total equity

      ($ 326.9
     

 

 

 

 

(1)

In March 2012, Rayonier Inc. issued $325 million of 3.75% Senior Notes due 2022, guaranteed by certain subsidiaries. Semi-annual payments of interest only are due on these notes through maturity.

 

  b.

The following represents the pro forma adjustments to cash and cash equivalents as a result of the merger:

 

Decrease from extinguishment of existing Pope debt(1)

   ($ 106.2

Decrease from cash consideration paid to Pope
unit holders(2)

     (167.6
  

 

 

 

Pro forma adjustment to cash and cash equivalents

   ($ 273.8
  

 

 

 

 

(1)

Includes $9.2 million prepayment premium.



 

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(2)

Estimated based on the proration of cash, Rayonier common stock and Opco units issued in the merger would be equal to the amounts issued if every Pope unit received 2.751 shares of Rayonier common stock or Opco units and $37.50 in cash.

The following represents the pro forma adjustments to cash and cash equivalents as a result of the debt financing:

 

Issuance of new debt, net of debt issuance costs

     [—
  

 

 

 

Pro forma adjustment to cash and cash equivalents

   $ [—
  

 

 

 

 

  c.

Reflects the adjustment of $565.2 million to increase the basis in the acquired Timber and Timberlands to estimated fair value of $1,009.5 million. In determining the fair value of the timberlands, the Company utilized valuation methodologies including a discounted cash flow analysis. The fair value calculations are preliminary and subject to change after the Company finalizes its review of the specific types, nature, age, condition and location of Pope’s timberlands. The following summarizes the changes in the estimated depletion expense (in millions):

 

Estimated depletion expense

   ($ 175.0

Historical depletion expense

     154.0
  

 

 

 

Pro forma adjustment to depletion expense

   ($ 21.0
  

 

 

 

 

  d.

Reflects the adjustment of $6.8 million to increase the basis in the acquired real estate development investments to estimated fair value of $27.0 million. In determining the fair value of the real estate development investments, the Company utilized valuation methodologies including sales comparison and a discounted cash flow analysis. The fair value calculations are preliminary and subject to change after the Company finalizes its review of the specific types, nature, age, condition and location of Pope’s real estate development investments. The following summarizes the changes in the estimated Non-cash cost of land and improved development expense (in millions):

 

Estimated non-cash cost of land and improved development

   ($ 26.5

Historical non-cash cost of land and improved development

     21.8
  

 

 

 

Pro forma adjustment to non-cash cost of land and improved development

   ($ 4.7
  

 

 

 

 

  e.

Reflects the adjustment of $1.9 million to increase the basis in the acquired property, plant and equipment to estimated fair value of $7.4 million. In determining the fair value of the property, plant and equipment the Company utilized valuation methodologies including a sales comparison approach. The fair value calculations are preliminary and subject to change after the Company finalizes its review of the specific types, nature, age, condition and location of Pope’s property, buildings and equipment. The following summarizes the changes in the estimated depreciation expense (in millions):

 

Estimated depreciation expense

   ($ 2.5

Historical depreciation expense

     2.3  
  

 

 

 

Pro forma adjustment to depreciation expense

   ($ 0.2
  

 

 

 

 

  f.

At the time of this filing, the Company has not performed a detailed valuation analysis of Pope’s intangible assets. Consequently, the fair value and estimated useful lives will likely differ from final amounts the Company will calculate after completing a detailed valuation analysis, and the difference could have a material impact on the accompanying unaudited pro forma condensed combined financial statements.



 

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The following represents the pro forma adjustments to other assets (in millions):

 

Exchange of Pope units held by Rayonier Operating Company for equity(1)

   ($ 10.6

Decrease in investment in joint venture

     (1.8
  

 

 

 

Pro forma adjustment to other assets

   ($ 12.4
  

 

 

 

 

(1)

Rayonier Operating Company intends to exchange its Pope units for Rayonier Inc. common shares. As a North Carolina corporation, Rayonier Inc. does not have or present treasury stock on its consolidated balance sheet. Accordingly, the Rayonier Inc. common shares acquired will be retired on the Merger date.

 

  g.

Reflects the effects of extinguishing Pope’s outstanding debt upon completion of the acquisition. The net decrease to debt includes (in millions):

 

Decrease from extinguishment of existing Pope debt

   ($ 97.0

Increase from elimination of Pope’s debt issuance costs

     0.5

Plus: Pro forma adjustments current portion of long-term debt

     0.1
  

 

 

 

Pro forma adjustment to long-term debt

   ($ 96.4
  

 

 

 

Rayonier Operating Company has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the fair value adjustment of assumed Timber Fund debt and related amortization. Accordingly, Pope Timber Fund debt is presented at their respective face amounts and should be treated as preliminary fair values.

The following reflects the new term debt incurred to finance the acquisition of Pope (in millions):

 

Issuance of new debt, net of debt issuance costs

     [—]  
  

 

 

 

Pro forma adjustment to long-term debt

     [—]  
  

 

 

 

 

  h.

Reflects the accrual of estimated transaction costs of $28.0 million incurred by Rayonier and Pope directly attributable to the Merger. Transaction costs include fees for investment banking, advisory, and other professional fees. Transaction costs are expensed as incurred and accounted for outside of the business combination in the post-acquisition financial statements of the combined entity. As the transaction costs will not have a continuing impact, Rayonier Operating Company has not shown the estimated transaction costs in the Pro Forma Statements of Operations.

 

      

Additionally, reflects the accrual an estimated $1.1 million of change in control payment obligation to a Pope executive incurred at the time of the Merger. Pope has previously entered into original employment contract with an executive officer in which Pope was required to incur severance obligations for matters relating to changes in control, as defined, and involuntary terminations. The Merger met the change in control criteria of the employment agreement. For the severance payment to be made, there must be a change in control and a termination event of the executive, as defined in the employment agreements, referred to as a “double trigger” payment. Since the Pro Forma Balance Sheet assumes the Merger has occurred and the payment will be made to the executive, the obligation has been accrued in the Pro Forma Balance Sheet as of December 31, 2019. Dual trigger payments are accounted for outside of the business combination and not included in the purchase price, instead, recorded as compensation expense in the post-acquisition financial statements of the combined entity. As the change in control payment will not have a continuing impact, Rayonier Operating Company has not shown this amount in the Pro Forma Statements of Operations.



 

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The following represents the pro forma adjustments to accrued expenses (in millions):

 

Increase for transaction related expenses

   $ 28.0

Increase for change in control payment obligations

     1.1
  

 

 

 

Pro forma adjustment to accrued expenses

   $ 29.1
  

 

 

 

 

  i.

Reflects the adjustment of $1.0 million to decrease the balance in the acquired environmental liabilities to estimated fair value of $10.1 million. In determining the fair value of the environmental liabilities, the Company utilized valuation methodologies including a discounted cash flow analysis. The fair value calculations are preliminary and subject to change after the Company finalizes its review of the specific types, nature, age, condition and location of Pope’s environmental liabilities.

Additionally, includes a $3.9 million deferred income tax liability resulting from the preliminary fair value adjustment to Pope’s assets and liabilities.

The following represents the pro forma adjustments to non-current liabilities (in millions):

 

Increase in environmental liabilities

   $ 1.0  

Increase in deferred tax liabilities

     3.9  
  

 

 

 

Pro forma adjustment to non-current liabilities

   $ 4.9  
  

 

 

 

 

  j.

Represents the value of 5,782,052 Rayonier, L.P. units issued at $23.21 per unit (based on Rayonier’s closing share price on March 13, 2020) to finance the acquisition. Issuances were estimated based an equivalent election of common share and Opco unit consideration.

 

  k.

The following represents the pro forma adjustments to equity, including the elimination of the historical equity of Pope (in millions):

 

General partner consideration

   $ 10.0   

Historical Pope general partners’ capital as of December 31, 2019

     (0.8   
  

 

 

    

Pro forma adjustment to general partner’s capital

        9.2

Issuance of limited partner units to Rayonier Inc.

     1,556.9   

Historical Pope limited partners’ capital as of December 31, 2019

     (42.0   
  

 

 

    

Pro forma adjustments to limited partner’s capital

        1,514.9

Decrease for transaction-related expenses

     (28.0   

Decrease for change in control payment obligations

     (1.1   

Issuance of Rayonier restricted stock units for Pope’s vested awards

     1.1   

Exchange of equity for Pope units held by Rayonier Operating Co.

     (10.6   

Issuance of redeemable Opco units (1)

     134.2   

Exchange of equity to general partner units to Rayonier Inc.

     (10.0   

Exchange of equity to limited partner units to Rayonier Inc.

     (1,556.9   
  

 

 

    

Pro forma adjustment to equity

        (1,471.2
     

 

 

 

Pro forma adjustments to controlling interest capital

      $ 52.9
     

 

 

 

 

(1)

The estimated value of redeemable Opco units issued is based on an equivalent election of common share and Opco unit consideration and on the closing price of Rayonier common stock on March 13, 2020, the latest practicable date prior to the date of this filing. Pursuant to accounting rules, the value of redeemable Opco units issued will be based on the price of the Rayonier Inc. common stock as of the closing date, and therefore, will be different from the amount shown above. Based on a sensitivity analysis, a change in the



 

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  Rayonier Inc. common stock price of 10% would result in the following changes in the value of redeemable Opco units issued: