Fletcher Chairman disappointed, unshaken about failed deal

By NZPA

Wednesday 14th August 2002

Fletcher Forests is reviewing its options in the wake of a shareholder vote rejecting its $1.4 billion purchase of the 160,000ha Central North Island forest estate.

The vote, which needed a 75 percent majority, was lost by 5 percent.

Shareholders at yesterday's meeting at Eden Park, Auckland, expressed both support for the deal, which involved giving Chinese company Citic a 35 percent stake in Fletchers in return for a cash injection, but also concern about a fourfold increase in debt.

Asked if the decision was a blow to the credibility of the board, chairman Sir Dryden Spring said it was not.

"Obviously I'm disappointed because this was a deal which would create significant value for our shareholders. It was the right thing for them to do. It would also have ensured that the Central North Island Forest was retained in New Zealand hands, something that is not assured now.

"But we've got to remember that most shareholders, by a significant majority, supported the proposal and I think (it is) a wonderful exercise in shareholder democracy," Sir Dryden told National Radio.

Sir Dryden admitted the biggest bugbear always seemed to be the exit of Rubicon, a Fletcher Forest spin-off which holds 17.6 percent in its former parent.

Rubicon was to be paid 37c a share for its stake when the current average trading price is around 22c.

"The Rubicon exit was always the issue. It's clear that many of our shareholders didn't like it, we didn't like it ourselves. But when somebody comes along and is prepared to pay a premium of 80 percent on market to put cash into the company, you can't tell them just to go away, you have to get that up in front of your shareholders."

Sir Dryden also felt shareholders were worried that the Rubicon deal would have raised the company's debt level.

Asked if the board had a back-up plan, he said the company would firstly concentrate on its existing operations and the possibility of adding to other activities such as processing.

However, the Central North Island Forest was a crucial factor in giving such investment security of supply.

Sir Dryden said it was also important to look at the need for industry consolidation in New Zealand forestry.

Rejection of the Citic deal was "a setback for industry consolidation" as it would have been the biggest consolidation of forests in New Zealand which could occur.

Meanwhile, Bruce Sheppard, the chairman of the Shareholders Association which opposed the deal, rejected suggestions the group had been used by other opponents to the deal, possibly with vested interests.

"I don't think it's about victory. It's about voice... Perhaps the Shareholders Association's stand has been a galvanising point for other interests that then came into play.

"But it certainly isn't about victory. It's about collectivism and the power of little people... when they come together in force."

Major Rubicon shareholder GPG, which also opposed the purchase, is now expected to put forward proposals to shape the forestry industry.

Director Tony Gibbs echoed Sir Dryden's thoughts about the need to consolidate existing operations.

"This has been a resounding defeat, I would think... What Fletcher Forests has got is wonderful assets in its own right and it should move forward," he told National Radio.

At the meeting he told shareholders that "our view is clearly that Rubicon, with GPG as its major shareholder, influencing Fletcher Forests, is a much better bet for Fletcher Forests minorities than a 35 percent shareholder who may well be, or become, a customer and who may well have other motives".

Comments from our readers

No comments yet