VULC - Vulcan International

[JJR]

Thanks writser for the head up on this thread.  On the BH board, some have privately asked me if I was Jan, I am not, but I did post on the SA Vulcan thread. 

 

The problem with Vulcan's estimated liquidation value is that we have guess upon guess.  Tom Gettler is giving out no info.  Nobody know if we will get financials for 2018 and if they will be liquidation financials. I will stick by my estimate of $140-$150/share and will be disappointed if it comes in under $140/share and pleasantly surprised if it comes in above $150/share in a reasonable time frame (as in one year happy, 3 years disappointed). 

 

Will liquidation expenses be on the low side or high side?  My guess is the high side for something that should take very little effort and expense since most of the value is in the stock portfolio.  We should receive one big check early in the process and smaller checks later, but apparently Gettler doesn't see it that way.

 

The Michigan timberland could sell for 800/acre or it could be more or less (they are not contiguous parcels, but one friend who knows something about timber said the timber is very good).  Same with Clarksville, is it $100K or $300K/acre?  One friend's estimate of $200K is as good a guess as any.  How much will the demolition of the very large Clarksvliie building cost, and a big unknown is the environmental report, but I am assuming good news on that front.  They are starting to demolish the building and the interest in those 31 acres is huge (google it and you can see how attractive this is and there will be a bidding war for it, with Austin Peay the likely victor.)

 

In the last 6 months I don't know if Vulcan sold a stock like PNC at the lows of $110 or the highs of $140 or if any of the stock holdings have been sold to date, and that moves value a lot, as the stock portfolio and especially PNC is where most of the value resides. Are they selling weekly or plan on waiting for certain price points?  I know they hired tax experts to minimize taxes, but I'm assuming not much will happen on that front.

 

There are no state corporate income tax for companies that are formed in Delaware but do not transact business there, and that's were the stock portfolio is located.  In addition to federal corporate taxes, state corporate taxes will likely be due in Ohio, Tennessee, and Michigan however on the assets residing and sold there.

 

So there are likely to be pluses and minuses by the time this liquidation is history.

 

One friend has a decent relationship with Gettler, while I am persona non grata - which is an understatement.  Gettler said he's getting lots of calls from shareholders.

 

 

Friends have peppered him with lots of questions, but received no specific answers on any. 

 

 

They were stonewalled, as TG said he can't give info to just one shareholder, to which they replied that's what PR's are for - keeping all shareholders informed in a timely manner!

 

So the general info from Gettler was:

(1) the liquidation is going very well (but would give no specifics on any asset sales).

(2)  Gettler is working night and day since the liquidation announcement and he is a one-man show.

(3) The liquidation will be completed within the 3-yr time frame.

(4) They are dealing with pension issues and they are down to 2 employees.

(5) Shareholders will be VERY happy with the final outcome (Gettler  emphasized "very happy" as he said it several times), but he would give no details as to why we would be so happy.

 

Best,

Jim

 

 

 

 

 

 

[wabuffo]

especially PNC is where most of the value resides.

 

Hey Jim - good to see you posting!  Its not just PNC, I think USB is the second biggest holding and a significant part of the overall portfolio (though not as big as PNC).  IIRC, Vulcan's cost bases of PNC (~$4/share) and USB (~$1/share) are very, very low, so there would be sizeable capital gains taxes due.  Assuming the bank stocks have not been sold yet, at current prices, I reckon liquidation value is around $140-$150.  But who really knows.

 

wabuffo

[writser]

Thanks for your feedback.

 

We should receive one big check early in the process and smaller checks later, but apparently Gettler doesn't see it that way.

 

Yeah, that's one of the key issues and so far I've been disappointed with that. Yes, there are important tax issues etc. etc. but liquidating the stock portfolio and distributing proceeds should be a question of weeks rather than years. Given that they announced the liquidation in October 2018 they could (should?) have distributed $75 - $100 to shareholders already while retaining a comfortable cash cushion. I hope they don't decide to mail us a $145 cheque in October 2021.

[Hielko]

Hi Jim,

 

Thanks for your info. I'm also involved in this one, but it's indeed a situation of guess upon guess what the final value will be. I'm sort of okay with that, as long as the initial guesses have been right it could surprise equally well to the upside as to the downside. But it will become interesting if the stock prices of their portfolio will move in a really big way for example since we have no clue if they have sold anything yet or not...

[fishwithwings]

I don’t understand why you guys are still holding the stock. If you estimate the liquidation to return $140 per share, it’s only 12% above today’s price and it could be another 2 more years until any distribution is paid.

[Foreign Tuffett]

I don’t understand why you guys are still holding the stock. If you estimate the liquidation to return $140 per share, it’s only 12% above today’s price and it could be another 2 more years until any distribution is paid.

 

Is $140 per share your estimate, or are you just referencing that # because it appeared earlier in this thread? My current estimate is meaningfully higher.

 

I don't think anyone here knows the liquidation timeline, but one thing I would note is that (assuming its stock positions haven't already been sold off) VULC generates a non-trivial amount of cash flow solely from the dividends it receives.

[fishwithwings]

I don’t understand why you guys are still holding the stock. If you estimate the liquidation to return $140 per share, it’s only 12% above today’s price and it could be another 2 more years until any distribution is paid.

 

Is $140 per share your estimate, or are you just referencing that # because it appeared earlier in this thread? My current estimate is meaningfully higher.

 

I don't think anyone here knows the liquidation timeline, but one thing I would note is that (assuming its stock positions haven't already been sold off) VULC generates a non-trivial amount of cash flow solely from the dividends it receives.

 

I'm basing it on what others have mentioned.

[Hielko]

I guess you never now with this management team, but as long as they continue to own their stock portfolio their assets should more or less generate a market return. So you get the closing of the discount + (or -) the underlying return in the mean time. Secondly, you should think that they should be able to liquidate their stock portfolio faster and distribute the proceeds. But then again... the announced the liquidation last october and nothing has happened so far, so who knows....

[Foreign Tuffett]

Per Oddball Stocks, Vulcan is putting its timberland up for sale.

 

http://www.oddballstocks.com/2019/08/vulcan-international-corp-timberlands.html

[Foreign Tuffett]

The company finally put out another press release.

 

https://www.otcmarkets.com/stock/VULC/news/CORRECTION-FOR-IMMEDIATE-RELEASE?id=240805

[Hielko]

The company finally put out another press release.

 

https://www.otcmarkets.com/stock/VULC/news/CORRECTION-FOR-IMMEDIATE-RELEASE?id=240805

I guess we should be happy that they were generous enough to give shareholders a hint of when a first distribution might be paid...

[writser]

Bids for the timberland were due October, 11. Status at the real estate broker has been changed to 'Contract Pending'. Both PNC and USB, the stocks that supposedly make up the majority of the remaining assets, are up ~30% YTD. The Vulcan Clarksville plant is being demolished and the land could be valuable. If everything goes according to plan VULC could easily distribute as much as $170 per share in a few months.

 

Of course there is a lot of uncertainty. Are PNC and USB actually part of their stock portfolio? Has the stock portfolio already been liquidated in 2018? What will be the tax implications of the liquidation? What was the timberland sold for? Will there be delays? What do the current financials look like? Nobody knows. Crazy situation with a paranoid CEO.

 

Still one of my largest positions though.

[Foreign Tuffett]

~$170 is my best guess for ultimate liquidation value here.

 

This is speculative, but I doubt any of the equity positions have been sold. Gettler had to have known last year that selling off the timber and real estate was going to take an extended period of time. Why be in a hurry to realize big gains and have to pay a tax bill? Also, why forgo an extra year plus of dividends? Finally, this is a company with a proven history of sitting on its hands for extended periods of time.

 

My interpretation of the most recent press release is that Gettler, at the very least, wants to have a good idea of what the Clarksville property will sell for before announcing any distributions. Completing "enviromental due diligence" is probably an important part of figuring out what the property is worth. The building itself was only demolished last month.

 

https://www.theleafchronicle.com/story/news/local/clarksville/2019/10/14/demolition-clarksvilles-vulcan-plant-begins-college-street/3978152002/

[Hielko]

I think you are right, but who knows what is exactly going on there...

[writser]

Yeah, it wouldn't really make sense to liquidate the stock portfolio and then hold on for the cash for two more years until you finish selling some real estate. So I also think it is likely they are still holding shares. But then again, who knows. So far I wouldn't call their approach 100% rational and shareholder-friendly ..

 

FWIW Weyerhaeuser just sold 555k acres of Michigan timberland for ~$300m or $540 / acre. Though the sale was the whole division, personnel including. So I'd guess the bare timberland prices would be lower. ~$500 / acre still seems like a reasonable guess.

[Foreign Tuffett]

Judging by the photo in link, the demolition of the Vulcan building is complete

 

https://clarksvillenow.com/local/landscape-architectural-firm-announced-to-provide-streetscape-improvement-plan-for-vulcan-corridor/

 

 

[Hielko]

That looks pretty liquidated to me :p

[capitalg]

Oddball Stocks posted an announcement from the company indicating that they entered into an agreement to sell the Clarksville site:

 

http://www.oddballstocks.com/2020/06/vulcan-international-corp-vulc-sends.html

 

I am a shareholder and have not received, so unsure as to how this was distributed (or if my mail is just slow).

[SI]

Word around the campfire was the timber sale got done in excess of $1,000/acre. One of the people I spoke with said it was closer to $1200 as their timber was incredibly well stocked(i.e. excess inventory).

[wabuffo]

Word around the campfire was the timber sale got done in excess of $1,000/acre. One of the people I spoke with said it was closer to $1200 as their timber was incredibly well stocked (i.e. excess inventory).

 

That's very interesting.  In May, I tried to work out my google-fu search skills to see if I could find some information on Vulcan's Upper Michigan timberland.  I was able to find evidence that maybe Vulcan got a very good price but since I wasn't 100% sure, I kind of forgot about my work.  But I'll post what I found here - sorry for the long-ish post - but, here goes.

 

1) I found the sales brochure for the company's property summary.  As most people following this name already know, the company was selling the timberland it owns in Michigan's Upper Peninsula in Houghton and Ontonagon Counties.  The property comprises 14,306 acres.  (This number becomes important later on).  Here's a picture of the property summary (as always - you can click on the images to go full-screen for better readability):

 

 

2) Ok - so all property records are maintained in local county clerk offices.  More and more of them are starting to put their records on-line.  Ontonagon County is old-school and just has a welcome web-page and no on-line access.  But Houghton County is on-line.  So I did a search using "Vulcan Timberlands" on its County Register of Deeds.  This is what came up:

 

 

3) The top item looks like a transaction occurred on December 17, 2019 between Vulcan Timberlands and another company named "MWF V Vulcan LLC".  Who is MWF V Vulcan LLC?  It obviously looks like a new LLC created to enter into this transaction.  So let's try to find its business registration on the Michigan's Secretary of State website.

 

 

4) It looks like this LLC was set up (11/19/2019) about a month before the transaction with Vulcan Timberlands.  But who or what is MWF V Vulcan, LLC?  At the bottom we have an address in Jackson, MS.  Let's google that address:

 

 

5) Now we're getting somewhere, the buyer looks like it is Molpus Woodlands Group. Its clear from their website that they are a buyer and investor in timberland.  Molpus describes its business as acquiring, managing, and selling timberland as an investment vehicle for pension funds, college endowments, foundations, insurance companies, and high-net-worth individual investors. Molpus currently manages approximately 1.8 million acres of timberland investments in 17 states. They do this by creating investment funds whose principal asset appears to be timberland.

 

Let's see if they have any SEC filings.  It looks like they've registered a number of funds historically.  Their latest one is Molpus Woodlands Fund V, L.P.  That's starting to make sense -- MWF V in the Michigan LLC stands for (M)olpus (W)oodlands (F)und (V).

 

https://www.sec.gov/Archives/edgar/data/1733020/000173302119000001/xslFormDX01/primary_doc.xml

 

6) I then went back to their Company website and looked at their news releases.

 

https://www.molpus.com/about-us/news/molpus-woodlands-group-purchases-14,306-acres-in-the-upper-peninsula-of-michigan.html

The Molpus Woodlands Group, LLC (Molpus), a timberland investment management organization headquartered in Jackson, Mississippi, has on behalf of a client, successfully purchased approximately 14,306 acres of timberland in the Upper Peninsula of Michigan.

 

Bingo!

 

The press release is dated Jan. 7, 2020 - a couple of weeks after the transaction date we found on the Houghton County county records.  And we have a match on the acreage and description straight from Vulcan Timberland's original property summary upthread.

 

7) Now comes the tougher part - how do we find out how much Molpus paid for the timberland?  I'm still trying to find that out.  But one thing I know is that if Molpus leveraged the property via a mortgage or other form of debt - which I'm thinking they did since real estate is almost always leveraged - then the liens have to be filed again at the County Clerk's office so that the bank can perfect its security against the assets.  So I went searching again, this time using "MWF V Vulcan, LLC" as my search term.  This is what I found in the Houghton County Clerk's website:

 

 

There we go!  While we don't have a sales price, it looks like MWF V LLC and Molpus Woodlands Fund V obtained $27m of mortgage financing from Southern AgCredit (they are a bank or finance company in MS, I looked them up) on March 27, 2020. 

 

While that doesn't completely confirm the sales proceeds to Vulcan - it does give us a rough idea of how much they got.  Assuming the equity portion for MWF V LLC/Molpus roughly matches the transaction costs for Vulcan, then $27m works out to $1,887 per acre.  That seems very high compared to recent appraisals over at KEWL (which have been ~$1000/acre, though my data is several years old).

 

MWF V Vulcan, LLC just registered in Michigan for this one transaction, so I don't think that LLC owns any other property.  Of course, the mortgage could cover a number of transactions that Molpus has done recently and they filed liens in a number of country clerk offices around the US for this one mortgage. 

 

Anyhoo - sorry for the long post, but the circumstantial evidence, though not 100% conclusive, does seem to point to a very high price paid for the Vulcan UP timberlands. 

 

wabuffo

[mjm]

impressive work

[SI]

That is excellent work.

 

I spoke with several brokers in the area who confirmed that it cleared at an elevated price. One of the brokers said it hadn't been touched in years and another described the price at a level where you could fund the "upsized" portion of the purchase price by just selling the excess hardwoods down to a level from which you could sustainably harvest.

 

It is a guess but I would doubt that $1,750/acre given the tone of the conversation but $1,300-$1,400 wouldn't surprise me.

 

 

[samwise]

impressive work

+1

[Saluki]

"But what I do have are a very particular set of skills; skills I have acquired over a very long career. Skills that make me a nightmare for people like you"

 

Word around the campfire was the timber sale got done in excess of $1,000/acre. One of the people I spoke with said it was closer to $1200 as their timber was incredibly well stocked (i.e. excess inventory).

 

That's very interesting.  In May, I tried to work out my google-fu search skills to see if I could find some information on Vulcan's Upper Michigan timberland.  I was able to find evidence that maybe Vulcan got a very good price but since I wasn't 100% sure, I kind of forgot about my work.  But I'll post what I found here - sorry for the long-ish post - but, here goes.

 

1) I found the sales brochure for the company's property summary.  As most people following this name already know, the company was selling the timberland it owns in Michigan's Upper Peninsula in Houghton and Ontonagon Counties.  The property comprises 14,306 acres.  (This number becomes important later on).  Here's a picture of the property summary (as always - you can click on the images to go full-screen for better readability):

 

 

2) Ok - so all property records are maintained in local county clerk offices.  More and more of them are starting to put their records on-line.  Ontonagon County is old-school and just has a welcome web-page and no on-line access.  But Houghton County is on-line.  So I did a search using "Vulcan Timberlands" on its County Register of Deeds.  This is what came up:

 

 

3) The top item looks like a transaction occurred on December 17, 2019 between Vulcan Timberlands and another company named "MWF V Vulcan LLC".  Who is MWF V Vulcan LLC?  It obviously looks like a new LLC created to enter into this transaction.  So let's try to find its business registration on the Michigan's Secretary of State website.

 

 

4) It looks like this LLC was set up (11/19/2019) about a month before the transaction with Vulcan Timberlands.  But who or what is MWF V Vulcan, LLC?  At the bottom we have an address in Jackson, MS.  Let's google that address:

 

 

5) Now we're getting somewhere, the buyer looks like it is Molpus Woodlands Group. Its clear from their website that they are a buyer and investor in timberland.  Molpus describes its business as acquiring, managing, and selling timberland as an investment vehicle for pension funds, college endowments, foundations, insurance companies, and high-net-worth individual investors. Molpus currently manages approximately 1.8 million acres of timberland investments in 17 states. They do this by creating investment funds whose principal asset appears to be timberland.

 

Let's see if they have any SEC filings.  It looks like they've registered a number of funds historically.  Their latest one is Molpus Woodlands Fund V, L.P.  That's starting to make sense -- MWF V in the Michigan LLC stands for (M)olpus (W)oodlands (F)und (V).

 

https://www.sec.gov/Archives/edgar/data/1733020/000173302119000001/xslFormDX01/primary_doc.xml

 

6) I then went back to their Company website and looked at their news releases.

 

https://www.molpus.com/about-us/news/molpus-woodlands-group-purchases-14,306-acres-in-the-upper-peninsula-of-michigan.html

The Molpus Woodlands Group, LLC (Molpus), a timberland investment management organization headquartered in Jackson, Mississippi, has on behalf of a client, successfully purchased approximately 14,306 acres of timberland in the Upper Peninsula of Michigan.

 

Bingo!

 

The press release is dated Jan. 7, 2020 - a couple of weeks after the transaction date we found on the Houghton County county records.  And we have a match on the acreage and description straight from Vulcan Timberland's original property summary upthread.

 

7) Now comes the tougher part - how do we find out how much Molpus paid for the timberland?  I'm still trying to find that out.  But one thing I know is that if Molpus leveraged the property via a mortgage or other form of debt - which I'm thinking they did since real estate is almost always leveraged - then the liens have to be filed again at the County Clerk's office so that the bank can perfect its security against the assets.  So I went searching again, this time using "MWF V Vulcan, LLC" as my search term.  This is what I found in the Houghton County Clerk's website:

 

 

There we go!  While we don't have a sales price, it looks like MWF V LLC and Molpus Woodlands Fund V obtained $27m of mortgage financing from Southern AgCredit (they are a bank or finance company in MS, I looked them up) on March 27, 2020. 

 

While that doesn't completely confirm the sales proceeds to Vulcan - it does give us a rough idea of how much they got.  Assuming the equity portion for MWF V LLC/Molpus roughly matches the transaction costs for Vulcan, then $27m works out to $1,887 per acre.  That seems very high compared to recent appraisals over at KEWL (which have been ~$1000/acre, though my data is several years old).

 

MWF V Vulcan, LLC just registered in Michigan for this one transaction, so I don't think that LLC owns any other property.  Of course, the mortgage could cover a number of transactions that Molpus has done recently and they filed liens in a number of country clerk offices around the US for this one mortgage. 

 

Anyhoo - sorry for the long post, but the circumstantial evidence, though not 100% conclusive, does seem to point to a very high price paid for the Vulcan UP timberlands. 

 

wabuffo

[mjm]

FYI, article on oddball stocks regarding payment as being direct w/o tranfer agent and possible need for those holding shares in retirement fund to contact for instructions.