Market trades blind as Fletcher forest bid fails

By Nick Stride

Friday 26th April 2002

Sharebrokers yesterday questioned the Stock Exchange's handling of Fletcher Challenge Forests' bid for the Central North Island Forest Partnership as another bare-bones release announced its end.

Fletcher Forests (FFS) chief executive Terry McFadgen said his company would not proceed with a March 28 agreement with the CNIFP's receiver, Ferrier Hodgson, to buy the partnership's assets.

He said it had not been possible in the time available "to finalise arrangements, fully satisfactory to the company, to enable the conditions in the agreement to be met."

FFS did not rule out another bid.

He confirmed in an interview with The National Business Review that the major issue was financing.

"We've made it pretty clear we're working with another party in terms of putting the proposal together so the arrangements (referred to) can be described as financing but they also include those associated arrangements," Mr McFadgen said.

FFS was confident when the agreement was signed that five weeks would be long enough to satisfy the conditions on the bid.

"But there were some management changes in one of the organisations that we were dealing with that slowed things down," he said.

Attention will now turn to a "back-up" agreement signed by Ferrier Hodgson with a second bidder, identified two weeks ago as businessmen Philip and Peter Vela.

The brothers clearly do not have the capacity on their own to raise the receiver's assumed asking price - the $US650 million ($1.45 billion) of senior debt owed to the CNIFP's banks.

So market commentators are assuming they are fronting a consortium.

Mr McFadgen said FFS had no knowledge of the Velas' position or financing.

Analysts said investors were trading FFS shares blind because of the paucity of information about its bid.

Had the Stock Exchange's market surveillance panel not granted FFS a waiver the company would have had to have given shareholders much more detail.

As things stand investors don't know FFS' offer price or how it had proposed to raise the money.

It remained unclear whether FFS had an issue raising its own share of the financing or whether the problem lay with its partner.

So it was impossible to tell whether FFS would be able to mount a viable counterbid to the Vela proposal.

One analyst said the announcement was a negative for the whole industry, which wanted to see the issue resolved as that would set valuation benchmarks.

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