Forests has fight on hands

By NZPA

Wednesday 19th June 2002

A small shareholder champion is promising to fight for a "fair and reasonable" deal for Fletcher Forests' minority shareholders by launching legal action if the deal to repurchase the Central North Island Forestry Partnership (CNI) proceeds.

Shareholders Association chairman Bruce Sheppard said today the transaction had all the hallmarks of an unfair deal where one partner, Rubicon, gets out of Forests at a high price -- 37 cents a share -- and the rest are stuck with a partner they know nothing about, South East Asia Wood Industries (Seawi).

"In order for shareholders to get out with a fair price we are advising shareholders to vote no," Mr Sheppard said.

"Then we would serve notice on the company that we are co-ordinating a class action minority buyback."

That would group minority shareholders in legal action to seek at least the same amount for their shares as Rubicon is to get.

"On the basis of that, if I was on the Forests board I would be wondering how Forests would finance a minority buyback and against that backdrop mightn't it be better to solicit a full takeover from another party."

Fletcher Forests conditionally agreed on Monday to repurchase the CNI from receivers Ferrier Hodgson for $US650 million ($NZ1.35 billion).

The complex deal, which requires shareholder approval, would see Chinese Government-owned Citic through Hong Kong-listed firm Seawi inject $US200 million into Forests via a share placement that would secure Seawi a 35 percent stake in Forests.

Seawi has been subject to a large number of stock exchange queries into exceptional price movements since it listed in Hong Kong in September 1997. In 1999 the Hong Kong Securities and Futures Commission successfully prosecuted a Seawi vice-president.

"To vote yes for this deal, shareholders would have to be pretty silly," Mr Sheppard said.

"A yes vote would see shareholders having to trust an unholy threesome of a previous marriage partner and a Hong Kong company with a chequered past."

Fund manager Xylem, which owns 7.6 percent of Forests, has already said it will oppose the deal, which it says is not "not fair and reasonable" for minority shareholders.

Forests chairman Sir Dryden Spring said the proposed placement price at 37 cents represents an 85 percent gain on the pre-announcement trading price of 20 cents.

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