Vela bid collape clears way for Fletcher Forests-Citc

By NZPA

Thursday 30th May 2002

The predictable collapse of a bid for the vast Central North Island Forests Partnership by Hamilton racing and racing tycoons Peter and Philip Vela has left Fletcher Forests and its foe-turned-friend Citic in the box seat.

Michael Stiassny of receivers Ferrier Hodgson said the Vela bid for the 190,000ha Kaiangaroa plantation had been terminated by mutual consent.

The Velas, reportedly having to remain out of the country for tax reasons, decided they did not wish to pursue the purchase any further, Ferrier Hodgson said in a brief statement.

Mr Stiassny said he had had some discussions with Forests since it had jumped back into bed with the giant Chinese corporation.

Asked where the Vela collapse left Forests, he said: "Nowhere at this stage. We have had some discussions with them which are continuing, but that's all."

Forests had yet to put a formal proposal to the receiver.

Forests shares, which rose sharply when it announced its dispute with Citic (China International Trust and Investment Corp) had been put behind it, gained one cent to 26 cents. The prefs rose three cents to 26 cents.

Shares in Rubicon which holds 17.6 percent of Forests, also rose three cents to 68 cents.

Forests confirmed it was in discussion with the receivers, Citic and Rubicon about the purchase of CNI assets and associated shareholding arrangements.

"No agreement has been concluded at this stage."

CNI was put into receivership by a syndicate of banks owed around $US640 million ($NZ1.34 billion) and it put the estate up for sale last year.

An initial offer by Forests and an unnamed partner to buy the plantation for around $US650 million collapsed after Forests failed to secure funding within the allowed deadline.

Under Forest's latest proposal, it will issue $US200 million ($NZ420 million) in new equity to Citic at 37 cents per share which would give the Chinese firm a 35 percent stake. The deal includes Forests buying back Rubicon's holding.

Two years ago, Citic alleged Forests had managed CNI to favour its own operations and unsuccessfully initiated legal action.

Forests has written off around $900 million from its investment in CNI, which was purchased from the New Zealand government for $2.25 billion in 1996.

This time round, Citic would be a financial investor in Forests with no management or marketing role, Forests chairman Sir Dryden Spring said last week.

His comments come in response to concerns from Shareholders' Association chairman Bruce Sheppard that Citic was chasing a 35 percent controlling stake in Forests "through the back door" with the aim of sourcing cheap logs.

However, Sir Dryden said there were no arrangements in relation to log supply to Citic or China, and Citic's involvement in the company, should the transaction proceed, would strictly be that of a financial investor represented at board level.

Like Forests, Citic was strongly in favour of more New Zealand-based log processing to add value to products rather than the export of logs, he said.

Forests' asset backing was 40c, not 60c as the Shareholders' Association had claimed, and the proposed placement price of 37c represented a 85 percent gain on the pre-announcement trading price (20c) of the shares.

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