Forum Archive Index - August 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Gerald,


>
> 
>I was distinctly unimpressed by the Xylem missive that arrived in my
>mail today. One of Xylem's arguments that the price being paid for
>the CNIFP assets is too high is that it "does not reflect the full
>strength of FFS's negotiating position as the natural purchaser of
>the CNIFP assets".
> 
>I'm sure that it's true that the assets are worth more to FFS than
>to most other potential purchasers. 
>
>


I think you are looking at this from a merchant bankers perspective.  
I don't disagree that the assets are probably worth more to FFS than 
other potential bidders.  However, my understanding of any auction 
process is that the selling price will stall when the *second* 
highest bidder runs out of steam.  

Think of it like a car auction.  Surely if you are after a car at 
auction you will only bid as high as necessary to secure the vehicle. 
 The fact that you *may* have have been prepared to bid more 
(because the vehicle is worth more to you) is irrelevant.  You only 
need bid high enough to see off the second highest bidder.  This 
forest partnership debarcle has been going on for months and when the 
pressure has gone on to front up *no other bidder has been able to 
come up with the cash*.  Rumours of other bidders are fine, and if I 
was auctioning a block of forests I would do everything in my power 
to make FFS/CITIC believe that other bidders are out there.  But that 
doesn't make it so.


>
>
>Ownership of the assets will provide savings in scale and  haulage,
>given the proximity of the  other major Fletcher forests and mills.
> 
>


Sure, which means FFS will be in a position to negotiate a very 
competitive processing deal with any *other* buyer of the forest 
estate!


>
>
> This gives the Receiver a strong negotiating position, not
> Fletchers. 
>
>


More bankers spin.  The receiver is never in a 'strong negotaiting 
position' as ultimately they don't want the goods.


>
>
>There has been a trickle of offers in the vicinity of
> US$650m, and I see no reason why this should not continue,
>
>


None of this 'trickle of offers' has been prepared to sign a deal at 
any price at all so far.

>
> 
> It's ironic that, while saying that the deal is overly generous to
> Rubicon, Xylem present in evidence a commentator (Brian Gaynor) who
> thinks it's a bad deal for Rubicon shareholders. 
>
>

What was the reason for Gaynor stating this?

>
>
>Can both of these be true? 
>
>

Yes.  It depends on the management synergies forseen, and the time 
frame, in any ultimate Rubicon 'disposal of the proceeds' plan.

SNOOPY


disclosure:  Disinterested party.  No shares held in FFS or RBC

---------------------------------
Message sent by Snoopy 
e-mail  tennyson@caverock.net.nz
on Pegasus Mail version 2.55
----------------------------------
"Sometimes to see the wood from the trees, 
you have to cut down all the trees."



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