ABN Amro's dual role 'tenuous'

By PAM GRAHAM

Broker and investment banker ABN Amro's release of research raising its valuation of forest products company Tenon, at the same time as it is advising the company on Rubicon's takeover bid, has raised eyebrows in the investment community.

Most brokers stop research when bankers from a separate part of the organisation are advising on capital-raisings or mergers and acquisitions.

Publishing research when separately advising a company was a tenuous matter, said Simon Botherway, president of the NZ Society of Investment Professionals.

It was best practice to fully disclose the nature of any advice relationship and more appropriate to say a valuation was under review, rather than change it, he said.

ABN Amro released a one-page report on April 14 increasing its valuation of Tenon to $2.04 a share from the $1.60 in a report on April 1. The valuation upgrade was attributed to the profit upgrade released by the company on April 8.

The report disclosed that ABN Amro was advising Tenon on a possible forestry sale and would earn fees for the role.

Tenon spokesman Paul Gillard said ABN was advising on the takeover bid received from Rubicon.

ABN Amro research chief James Miller said another, 30-page, report had been halted from publication.

The company took "Chinese walls" between research departments and corporate advisory extremely seriously, he said.

Other brokers have raised valuations of Tenon to take account of its profit upgrade.

Still, if the $1.15 a share return of capital still to be made to Tenon shareholders is stripped out, ABN's valuation of the remaining assets nearly doubled to 89c a share, from 45c.