Shares of the ever-mysterious farming and water rights giant JG Boswell (BWEL) rose 18% on Friday, putting it back near pre-Covid levels. The reason for Friday's jump was likely the sale of the company's 46% stake in Phytogen Seed Company LLC, a joint venture with Corteva (CTVA) wholly owned subsidiary Mycogen, to Corteva, the majority owner. If Corteva sounds familiar, it was a 2019 spin-off from DowDuPont.
It is not clear yet what BWEL received for the sale as details on Phytogen's financials are scant, with some information in BWEL's annual reports, which, by the way, are only available to shareholders with proof of ownership. (I literally write a letter to the company every year, with a brokerage statement proving ownership, then several weeks later I'm rewarded with the AR). I'd like to think that BWEL will reap well more than $100 million for its Phytogen stake, which is not an insignificant amount for a company with a market cap just south of $600 million, but time will tell.
BWEL is one of this value investor's greatest nemesis. I've owned shares since 2002 or so, bought on dips several times, and am still waiting for my investment thesis - the monetization of water assets - to play out. BWEL owns 150,000 or so farming acres in California, plus cotton land in Australia (more on that later), but the real gem, the "white whale" (or white grizzly, given recent events) as it were, has always been the company's water rights, estimated to at between 400,000 and 2 million acre feet. I've tended to believe the lower figure, but again, details are difficult to come by. Buyers of BWEL have long awaited the sale of those water rights; at $10,000/acre foot, that would value the water alone at $4 billion, several times the current market cap. Or at least that's the type of thinking that long-term investors have been holding onto. It's the value investor's greatest dilemma - assets on paper that appear extremely valuable - but without confirmation through monetization its just a figure on paper.
There's another potential asset sale happening at BWEL, but its been in the works for more than a year, so until it actually happens, I won't hold my breath. That's the sale of the Australian cotton farming assets, Auscott Limited, which was reported to be on the block nearly a year ago. There's still been no transaction, but talk of a $500 million+ $AD (or about $350 million $US), is again being mentioned in the Australian press, and the company website mentions that non-binding bids for the business, which includes 40,000 hectare (about 100K acres or 156 square miles, more than twice the area of Washington, DC) are due on August 12th.
BWEL is attempting to monetize some assets, just not the big enchilada (that we know of), and I wonder what the proceeds will be used for. Confusing matters is the fact that the company cut the quarterly dividend in May, from $3.75/share to $2.00. That's not the first time. BWEL also cut the dividend in 2015 from $4.50 to $2.25, and since then, had been seemingly ramping it back up.
I've seen some speculation of a "special dividend" being paid with the Phytogen proceeds, but I don't buy into that. A stock buyback may be more realistic. But again, I won't hold my breath as this company has always marched to the beat of its own drummer.
