Rubicon, Fletcher Forest and GPG shares rise after partial bid

By NZPA

Thursday 29th August 2002

Shares in Guinness Peat Group (GPG), Fletcher Forests and Rubicon all rose today after Sir Ron Brierley's investment firm yesterday launched a $67 million partial bid for Rubicon at 75 cents per share.

GPG said the bid for control of Rubicon, which owns 18 percent of Forests, was aimed at setting a new direction for New Zealand forestry.

Rubicon shares today rose 5 cents to 74 cents, while Forests rose 1 cent, 4 percent, to 24 cents, and GPG rose 3 cents to 178.

Brokers have assessed the bid as undervaluing Rubicon.

Forsyth Barr Frater Williams executive director Don Turkington said Rubicon's rise to nearly the offer price could be read different ways.

"It probably means that whoever is buying at 74 cents, and it looks like it's institutional buying, expects GPG will be successful and will do something with Rubicon which adds value; or alternatively they think GPG will have to pay some more," he said.

Rubicon's directors said an independent directors committee had been set up and would appoint advisers to assess the bid.

That report, along with a directors' recommendation, would be sent to shareholders no later than 14 days after GPG's offer was sent to Rubicon shareholders.

Under the New Zealand Takeovers Code, Guinness Peat Group must send its offer to Rubicon shareholders between September 11 and September 27, and hold the offer open for 30 days.

Analysts believe the tight-fisted corporate raider will face an uphill battle to win control at its current offer price.

GPG's New Zealand director Tony Gibbs yesterday revealed GPG's deft bid to lift its 19.9 per cent stake in Rubicon to 51.9 percent.

That would involve buying 40 percent of the Rubicon shares GPG did not already hold. The company also said it would be content with a stake between 30 and 50 percent if it did not reach the 51 percent mark.

However, analysts said assess the bid to be below net tangible assets which are estimated at over 80 cents per share.

"It's a little on the light side," said First NZ Capital analyst Andrew Mortimer.

"People are going to say it's pretty mean," said ASB Securities' head of advisory, Stephen Wright.

Mr Gibbs said the offer price was not too low and GPG would be sticking with the price.

He noted that even a holding of between 30 and 50 percent would give GPG enough influence over Rubicon to in turn influence Fletcher Forests.

But a stake within that band would require shareholder approval.

The second largest block of shares after that of GPG is the nearly 16 percent held by the New York-based Perry Corporation, but those shares are locked up by a court injunction after GPG this month accused Perry of disguising the extent of its holding. A date has yet to be set for the court hearing that could free them up.

The third largest shareholder is AMP Henderson, with 11.3 per cent.

The fund manager's chief investment officer, Chris Wozniak, cast doubt on whether the AMP would sell at 75c when he noted that most of the "75c sellers" would have been mopped up when GPG secured its 19.9 percent stake at that price in last month's late-night raid.

He said AMP would wait for the recommendation of Rubicon's independent directors before deciding whether to sell.

Mr Gibbs said the bid was important for GPG's vision to promote consolidation and co-operation within the forestry industry -- but wouldn't elaborate on exactly what that meant.

GPG has between 14 and 30 days to formally present the offer to Rubicon shareholders.

First NZ's Mr Mortimer said it was hard to see an outcome for Rubicon below 80 cents.

He doubted shareholders would approve the holding of a stake of 30 percent to 50 percent, saying that would effectively give GPG control of the company without having had to pay a premium.

Forsyth Barr head of research Rob Mercer saw few reasons for shareholders to reject GPG holding 30 percent to 50 percent.

"The game plan centres around Fletcher Forests and if they (GPG) can do something positive on Fletcher Forests then Rubicon shareholders will benefit from that," he said.

Macquarie Equities senior investment analyst Arthur Lim said analysts valued Fletcher Forests shares at 34 cents. In that light, Rubicon's Fletcher Forests stake contributed to a net asset backing of $1 a share for Rubicon.

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