Forum Archive Index - November 2000

["G Stolwyk" <stolwyk@wave.co.nz>]

 Hugh,

 

Please refer to the scenarios given on Nov 12 and 13.

Now the shares are ex rights, obtaining the majority of the ordinary shares is not sufficient. 

  

However,any large stake would force a competitor to buy them out at an early stage or later on.

 

It means that the first mover has the advantage. However,a  player may wait till the Board has sufficiently written down the forest assets as they were forced to do by the well informed market.

 

The Board was talking about selling off FFS at a higher sum.

It would find this a difficult task if a global player took control of 50.5% of the ords. as well as 50.5% of the pref. class.

 

He would not agree to a sale by FCL of FSS.

 

The game will then be 'checkmate' as far as the Board is concerned!

 

I don't know if a holder of a 50.5% stake in the prefs.only, could block any proposal by the FCL Board. Anyway, it would be very embarrassing!

 

Please refer to the 'Separation update' of Oct.10.

Page 4: 'In addition, Rubicon will subscribe for $90 mill.of Forests ord. ............at  a cum issue of 70 cents(aprox.129 mill. shares).There is no need to discuss the valuation- The market has already decided that!

The  'rider' on page 5 is significant and also,in my opinion, very onerous for FCL.

 

There were heavy penalties should the separation not succeed.( I can' t find a closure date of this contract with the underwriter).

Rubicon will agree to acquire a portion of any rights issue shortfall to a maximum of $170 mill.or an equivalent of 680 mill. shares. It already acquired 129 mill.shares (see above); the total that Rubicon will spent, is a minimum of $ 260 mill.for about 809 mill ord. and pref. shares, or about 32 % of all stock on conversion. 

 

If Rubicon were to take up these shares at a big outlay, they would block a complete takeover,but would have to borrow the money to do that.

 

My guess is that Rubicon would eventually have to sell at a  profit,one hopes. 

 

However, if the underwriter would presell any shortfall to a large player, then, perhaps they could claim that there is no shortfall and Rubicon would be left with the 129 mill shares.             Once they calculate the carrying cost then there may not be a lot of profit to be made,if they sold.

 

Any 'shellshocked' Directors may decide not to support any proposal for taking up any shortfall if there is no need to do that. 

 

If the Board can come up with a realistic valuation (with and without the CNIFP partnership), then we may  see a rise in FFS rights and share prices.

 

We hope that in addition there will be competition by major players! 

 

Forests are important to the user; however, the enlarged FFS will have a massive amount of shares and an investor may not see a dividend for some years to come.

 

The outcome of any ' happenings' to the CNIF partnership,will have a profound influence on profits of FFS.        

   

Hugh, these are my opinions

 

Gerry