More legal action ahead of tomorrow's Fletcher Forests vote

By NZPA

Monday 12th August 2002

Another player in the $1.4 billion Central North Island Forests Partnership (CNIFP) deal has thrown its legal hat into the ring.

Investment company, and Rubicon shareholder, Guinness Peat Group launched legal action this afternoon to prevent fellow Rubicon shareholder Perry Corp from voting on the forestry estate deal tomorrow.

If successful, GPG's action would remove one of the key parties in favour of Fletcher Forests' plan.

GPG filed the papers in the High Court at Auckland today, claiming that the United States hedge fund Perry failed to tell Rubicon or the stock exchange that it already held a substantial amount of shares in Rubicon when it bought more last month.

Rubicon is the largest shareholder in Fletcher Forests, and received High Court approval yesterday to vote on the deal, following legal action lodged last week by major Fletcher Forests shareholder Xylem seeking to have Rubicon excluded.

Perry, which said it will vote tomorrow in favour of Fletcher Forests' proposal to buy the forestry partnership, told the NZSE on July 12 it had increased its shareholding in Rubicon to 15.98 percent, from 4.90 percent.

In fact, GPG claims that Perry Corp held more than 5 percent of Rubicon shares all along, despite filing a notice last year that it had reduced its shareholding.

GPG wants Perry to forfeit all its Rubicon shares as a result of the claimed failure to notify the exchange of its total shareholding.

In addition, GPG wants any voting rights Perry holds in Rubicon to be made void.

A week before Perry increased its stake, GPG acquired a 19.99 percent shareholding in Rubicon "in ignorance of the fact that Perry Corp had a relevant interest in Rubicon".

"Absent the existence of the relevant interest of Perry Corp in the Rubicon shares, GPG's holding of 19.99 percent would have allowed it to exercise significant influence over the direction of the company and the appointment of the board," GPG's claim states.

GPG director Tony Gibbs has said GPG will vote against the proposed purchase of the CNIFP.

GPG solicitor Richard Shera told NZPA he did not know if the court would make a decision before the shareholders' meeting.

Late last month the Securities Commission launched an investigation into Perry's purchase of $27 million worth of Rubicon shares.

Meanwhile, following its defeat in the High Court, Xylem is now likely to wait until after tomorrow's vote on the Central North Island Forestry Partnership deal before taking further action.

Xylem president Stephen Hurley is understood to be flying into Auckland early tomorrow in time for the special shareholders' meeting on the deal.

Yesterday, Justice Williams declined Xylem's bid to stop Fletcher's biggest shareholder, Rubicon, from voting its 17.6 percent of the company's shares on resolutions approving the deal.

Since the main resolution will require 75 percent approval, and opponents to the deal are generally reckoned to have close to 25 percent support, had the judge's ruling gone the other way it would have effectively killed the plan.

Xylem already has legal moves waiting in the wings that are due to be discussed at a judicial conference on August 22.

Fletcher Forests chief executive Terry McFadgen today welcomed the court ruling.

"We are pleased to have obtained clarity on this issue, prior to our special shareholders' meeting tomorrow. The court ruling is consistent with the legal advice we had received, and with the prior ruling of the NZSE's Market Surveillance Panel on this issue," Mr McFadgen said in a statement.

On Friday the NZSE said that according to its listing rules, Rubicon was able to vote on Fletcher Forests' proposed purchase of the 165,000ha of forests and assets.

Meanwhile, Fletcher Forests released a statement tonight denying rumours that the company's directors would be rewarded if the CNI deal goes ahead.

"In response to rumours circulating in the market, Fletcher Challenge Forests advised that there are no arrangements in place, or contemplated, for directors or executives of the company to receive bonuses or other emoluments should the transactions proposed... be approved," the company said.

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