New bidder crashes Tenon party

By Duncan Bridgeman

Friday 14th May 2004

Rubicon's tight-fisted offer for control of Tenon has flushed out a mystery bidder.

The National Business Review understands a new offer is being prepared following an independent report that labelled Rubicon's $1.85-a-share offer as unfair.

Industry sources said the secret bidder was definitely not Carter Holt Harvey or Fletcher Building. Instead, Norwegian paper giant Norske Skog's name has been thrown into the ring.

Norske Skog is the world's second-largest producer of newsprint paper and is heavily focused on developing the Asian market. It already has a presence in New Zealand and knows the Tenon business well.

The company made headlines here when it bought Fletcher Paper in 2000. Paper shareholders received a premium of more than 80% on the sale of their stock at $2.50.

This year Norske Skog joined Carter Holt Harvey in a lawsuit against Tenon over the continuation of supply of pulp wood.

The lawsuit came just as Tenon sought approval to sell its forests and focus on processing and distribution but has since been settled.

Whatever the outcome, the new player adds weight to the theory that Rubicon's bid was simply a method of driving up the Tenon share price to exit its 19.9% holding.

Rubicon's offer of $1.85-a-share to lift its holding to 50.01% was heavily criticised as too stingy, with Tenon's independent directors recommending shareholders reject it.

Speculation of a counterbid had helped keep the share price up above Rubicon's offer until Wednesday when Grant Samuel released its report valuing the company at $2.01-2.22 a share.

The advisor's report warned the Rubicon offer was highly conditional and paid no premium for control of Tenon.

It found no compelling reason for shareholders to accept a takeover offer that was "below full underlying value."

Rubicon "sweetened" its offer last week by including an opt-out clause in the formal offer it sent to Tenon shareholders.

Shareholders who accepted Rubicon's offer would be able to withdraw from it if a higher offer emerged, it said.

However, Grant Samuel questioned the value of the opt-out as it saw no additional benefits or incentives to Tenon shareholders who intended accepting the Rubicon offer.

It also warned shareholders who did not agree with Rubicon's management that they might not be able to exit their entire stakes as Rubicon was seeking only 39% of the shares.

Analysts were expecting the report's valuation to have a lower range of at least $2.

News of a new offer is likely to be welcomed by investors who have ridden a wild ride at the company formerly known as Fletcher Challenge Forests.

The Rubicon offer must remain open until the end of June 3 and can be accepted by Tenon shareholders regardless of whether the offer is declared unconditional or not.

Grant Samuel noted that by not accepting the Rubicon offer, early shareholders retained the option to accept a higher offer should one be made from either Rubicon or another party.

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