Surveillance panel makes statement on Forests deal

By NZPA

Wednesday 26th June 2002

Stock Exchange watchdog the Market Surveillance Panel today confirmed it will not grant any waivers to Fletcher Forests in its bid for the Central North Island Forest estate.

The $US650 million ($NZ1.32 billion) deal will see Forests join with its former partner, Chinese investment company Citic, to buy the estate.

Citic is putting $NZ407 million into Forests through the Hong Kong listed company South East Asia Wood Industry Holdings (Seawi), and will own 35 percent of the company.

The panel said in a statement that it has advised Forests of the information it needs to provide to shareholders on the deal.

That includes correspondence with 7.6 percent shareholder Xylem Investments, and details on Citic subsidiary Seawi.

Xylem, a US-based fund manager, h as criticised the deal as unfair to minority shareholders.

The deal will die without Forests shareholders' approval -- and some will need a great deal of convincing before voting in favour.

Citic launched a charm offensive -- designed to soothe shareholders' doubts on the deal -- in Auckland yesterday.

Seawi chairman Peter Kwok, who has attracted some scrutiny from New Zealand observers, presented his case at a press conference, standing alongside Citic group executive, director and vice-president Mi Zengxin.

The pair said there was nothing unusual in the Citic-Seawi arrangement and that Forests would stay independent.

Both said they were investing for the long-term benefit of all, and Citic was using the small Hong Kong company to buy the forest for perfectly good reasons.

Mr Kwok said Seawi's motives were clear -- it was buying into Forests at 37 cents a share because it believed the price would rise.

"The shareholders should believe in that -- we've backed our belief with cash."

Fletcher Forests last traded up a cent at 25 cents.

Much of the opposition to the Citic deal centres on the sell-out of cornerstone shareholder Rubicon.

It has been able to get rid of its 17.6 percent stake, getting $48 million cash from Seawi and the Tahorakuri forest, both of which value its stake at 37 cents a share.

Many small shareholders say they should also be offered 37 cents a share.

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