Rubicon Ltd's share price rose 4c to 83c after its 33 percent-owned joint venture ArborGen Inc signalled an initial public offer (IPO) of shares in the United States to raise $US75 million ($NZ100 million).
The tree propagation company, whose operations once formed part of New Zealand forestry giants Fletcher Challenge and Carter Holt Harvey, has a tree nursery and other facilities at Te Teko in the Bay of Plenty.
The filing to the Securities and Exchange Commission (SEC) by the Summerville, South Carolina-based company argues that rivals are smaller and have less advanced technology.
It details pressures on supply of wood, including deforestation, protection of native forests and drivers of demand and concludes the commercial forestry industry will rely more on purpose-grown trees.
The company is also targeting the traditional pulp and paper and wood products markets, the growing biopower and charcoal markets, and the emerging biofuels market.
It notes risks, which include that an alliance of conservation organisations is suing the US Department of Agriculture over a permit issued to ArborGen for experimental planting and flowering of a new, genetically engineered hybrid on 28 secret sites across seven southern states.
"Our freeze-tolerant tropical eucalyptus and other biotechnology products in our pipeline are not created using traditional breeding methods but are developed in a laboratory by altering the genetic material of trees," the SEC filing says.
It said that on occasion, there has been vandalism and destruction of property of companies in the biotechnology industry and public attitudes may impact on customer acceptance and lead to regulation.
Many customers seek certification of their forestry products from third parties such as the Forestry Stewardship Council, which currently does not grant certification to any forestry products that include biotechnology enhancements.
The company had net losses of $US18.1m, $US15.3m and $US14.7m, respectively in the last three years. It expects to continue to incur significant research and development expenses. Gross margin has decline as a result of the global economic downturn.
Research and development expenses decreased 19 percent to $US11.2m for the year ended March 31, 2010.
As at June 30 the company 174 employees at 13 nurseries, 15 seed orchards, 20 distribution centres and three research and development facilities located throughout the Southeastern United States, New Zealand and Australia, as well as an office in Brazil.
The cost-effective production of high-volume quantities of some products depends on the company's ability to scale our existing or subsequent complex production processes.
ArborGen purchased Horizon2 in 2007 from Rubicon and International Paper and MeadWestvaco sold their respective nursery and orchard businesses into ArborGen. Horizon2 was formed in 2004 from the merger of the biotech and nursery businesses of Carter Holt Harvey and Fletcher Forests.
