KKR PREPARES BID, page-2

Also worth pointing out KKR purchased 2,000 hectares of Edler's MIS Sandalwood plantations in 2013. They have been proven to have appetite for sandalwood assets. See below:

http://www.copyright link/business/agriculture/kkr-stumps-up-for-elders-trees-20130314-ji3x9

When Glaucus claims there is no reasonable buyer, that is outright deceiving. Bet you GMO, Harvard, ADIA and COE would love to be part of a syndicate to take the company private. Why wouldn't they? These institutional investors own trees in the ground - they have to take care of these assets no matter what market participants say. Would make their investment safer if they simply owned it. They also have a better ability to judge the value of the assets than temporary short sellers.

Elder was purchased for $70M at 2,000 hectares. Quintis manages 12,182 hectares of known higher quality plantations. That puts a bottom on the valuation of USD $424.6M (AUD$ 551.5M). The Elders situation was widely known distressed situation, so that price is a loose comparable at best.

This hectare buyout excludes 1) any value given to Quintis incentive rights (20% of profits above IRR of 7% for institutional investors - this has nothing to do with MIS) or 2) any value given to the pharma subsidiary.

1) Institutional investors are the bulk of business: If I recall correctly, institutional investors would have assumed minimum IRRs of at least 10% when they planted. This was back in late 2000's when sandalwood pricing was USD $2,000/kg. Meaning institutional investors plantations don't require USD $4,500/kg to hit 10% IRR return hurdles. Therefore, since sandalwood oil currently sells for USD $4,500 - IRRs will be much higher than 10%. Anything above 7% Quintis get 20% of.

2) Zero talk of pharma subsidiary in any of this back and forth: the IPO market for pharmaceuticals in the US right now is very active. Santalis is based in San Antonio Texas. Companies who IPO on NASDAQ with even halfway decent investment banks in the US can get solid valuations. Especially with the number of indications Santalis has of >5. JPMorgan allowed Santalis to present at their last healthcare investor conference in January 2017.

Why would JP Morgan be allowing Santalis (subsidiary of Quintis) to present if they didn't think they could somehow generate fees for the investment bank? Look at JP Morgan's most recent pharmaceutical IPOs and see where they priced at (all >$200M USD). JP Morgan investment bankers would not waste time if they didn't expect to generate fees somewhere. Given newly active sector in healthcare capital markets right now (IPOs), JP Morgan promotion of Santalis, and recent pricing of IPOs in US - Santalis is absolutely worth something - likely >$200M-$300M if IPO market holds up.


PRIVATE BUYER VALUATION:

Bringing all together, to a private buyer, ~$550M (minimum tree value, likely much higher) + ~$200M pharma value (also minimum based on US IPO prices) + $100M (20% of profits above 7% IRR on institutional investors<< also minimum, do your own math).

$550M + $200M + $100M = at minimum USD $850M or AUD ~$1,100M.

+$1,100M Asset value minimum
- $352M Debt
= $650M Equity value minimum to private buyer

$650M equity divided by fully diluted share outstanding (447M)

Minimum value to private buyer of AUD $1.70 per share - including debt balance.


For the shorts who will comment to the above. ASSETS > LIABILITIES. In a private market transaction that means the shares are not worth zero. No matter the debt balance is. Further the tree assets valuation is based on a recent comparable transaction (Elders MIS Sandalwood plantation sale) so Sandalwood pricing has nothing to do with it.