Ann: Select Harvests Update , page-2

Interesting times. What will happen to TIM? What will happen to their investor owned almond orchards? Who owns the land and water rights associated with the almond orchards?

TIM's last Annual Report for the year ended 30 Sept 2008 listed TIM's horticultural assets at $46m, by acreage almond orchards make up just over 50% of TIM's horticultural assets. Given a fire sale of assets how much would SHV pay to acquire the almond related assets? $20m? Less?

What annuity income does TIM derive from their almond projects? You would have to think they would have a high EBIT on the annuity income, in which case it would make good sense to SHV to buy them. The main drawback would be that the finance required to buy TIM's almond assets would limit SHV's short term expansion plans.

The main risk that I can see on a cursory glance relates to the risk of another operator buying TIM's almond assets if the new operator sought to remove SHV as manager of the orchards. However, who besides SHV would have the means for such a purchase? Would they have the synergy benefits that SHV would have?

My view is that this risk would be remote depending on who owns the land and water rights attached to TIM's almond orchards. Also there are contractual obligations for SHV to manage the almond orchards so any attempt to change this could result in damages payable to SHV.