Forum Archive Index - September 2000

["charlie brown" <gordy_gecko@hotmail.com>]

Mike

Why say you that FFS is more likely to go to a recapitalisation and separate 
listing ie suffers the same fate as FLB?

Are you hearing that prospective buyers are turning their backs?

Also (hoping for a 3rd time lucky), does anyone know why FOR has not yet 
presented their 30 June 2000 results?


>From: "Mike Hudson" <mikehudson@clear.net.nz>
>Reply-To: sharechat@sharechat.co.nz
>To: <sharechat@sharechat.co.nz>
>Subject: Re: [sharechat] Mike Hudson - awaiting your update on FLB
>Date: Wed, 6 Sep 2000 13:04:06 +1200
>
>Peter wrote
>
>
>"Mike - been quiet re FLB lately.Really would appreciate what you make of 
>the
>years result.
>  From what you posted a few weeks ago I would say that you would be
>pleased
>With the result now out what are your latest views on sale of FLB?
>Looking forward to your response
>Peter"
>
>Well, I would hate to disappoint my avid readers so here is my update on 
>FLB for what it’s worth.
>
>The result for the June year was pretty much was pretty much as expected 
>although the $30m adjustment for the Fletcher Challenge Employee Fund was a 
>bit of a surprise and I can’t quite get my head around it. I was not best 
>pleased with the $20m write off on the Fijian and Chinese operations 
>either.  It was pleasing to see that the Steel division had a better result 
>as it is the division that would give a potential purchaser the biggest 
>concern.
>
>One area that makes me very uncomfortable is the concrete operation in 
>South America. The results were described as disappointing which could be 
>Fletcher speak for disastrous. The EBIT was a loss of $11m and I see we 
>have assets over there of $153m which is serious money. I would not be 
>surprised if the company soon announced that this is not part of the core 
>business and is to be sold at a huge loss (a la Steel adventure in China) 
>Fletchers have done this so often in the past it is almost inevitable.
>
>I agree with management that outlook for the current year is mixed. 
>Positives are
>
>     a.. Strong domestic commercial and infrastructure market.
>     b.. Weaker NZ dollar which benefits the exporting companies, 
>particularly FWP and to a lesser extent WWB
>     c.. Weaker dollar also assists those companies which have to compete 
>against imported product.
>Negatives are
>
>     a.. Slow down in the domestic residential construction market
>     b.. Falling confidence levels which impact on the buying decisions of 
>both individuals and businesses
>     c.. Net emigration, reducing the demand for construction materials 
>across the board
>     d.. Inflationary pressure. This could also be seen as a positive as 
>nothing stimulates the housing market more than a bit of inflation.
>As far as the divestment process is concerned my pick is a float. As I 
>understand it there is only one potential buyer doing due diligence, a UK 
>Investment Company (not GPG) This potential buyer would almost certainly be 
>looking at flogging off the assets piecemeal.
>
>The next Board meeting is in September and I would expect that any bid 
>would be accepted or rejected at that time. Don’t forget that it is in the 
>interests of the FLB top management for a float, they would rather be 
>running an NZ listed company than being divisional managers of an overseas 
>multinational or worse down at the Labour Exchange.
>
>Given that a float for FLB would be fairly easy, that there is very little 
>external interest and there is bound to be considerable pressure from 
>management my pick is a separate listing. The Board could argue that this 
>will allow the market to establish the true value of FLB. After listing the 
>management of FLB would need to the share price up quickly or there will be 
>an opportunity for a corporate raider like GPG to make a killing.
>
>As far as FFS is concerned a recapitalisation and a separate listing seems 
>to be increasingly likely. I believe that this would require about $400m in 
>additional equity which would have to come from a new equity partner, an 
>institutional placement or a rights issue which may not go down too well 
>with some.
>
>It would seem that the December deadline for the completion of the breakup 
>will not be met; the end ofJanuary is now considered more likley
>
>The above is my opinion only. I have no insider knowledge, only the 
>scuttlebutt that runs round any company.
>
>Cheers
>
>Mike H
>
>
>
>

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