Carter Holt denies break-up speculation

Carter Holt Harvey chief executive Peter Springford says he is not expecting a breakup sale of the company. Picture / Fotopress

Carter Holt Harvey isn't expecting to be broken up and sold by its 50.5 per cent owner International Paper Co (IP), despite many analysts suggesting such a scenario may occur.

"It's very clear that they have said we should look at the sale of their shares and that's what we are working on," Peter Springford, Carter Holt's chief executive, told Dow Jones Newswires.

When asked if the company is anticipating a breakup sale, Springford said: "I am not expecting that at this point."

In May, International Paper said it would work with Carter Holt "to explore strategic alternatives for selling our shares," a process it hopes to complete by the end of the year.

Many analysts say International Paper may break up the Auckland-based forest products exporter's assets and sell them at a premium to current valuations.

That argument has gained currency as doubts emerge that potential suitors will bid for the entire 50.5 per cent given Carter Holt's persistently weak export earnings.

Springford said talk of a breakup at this point is premature.

"I think it's speculation, and always there is plenty of that going on when there's a possible takeover," he said.

"They advised us that they want to sell their shares, and to speculate on other options is inappropriate," he added.

Analysts say the US company stands to benefit from a breakup sale rather than through stock-disposal alone.

The prospect of a breakup sale was given a boost when Carter Holt Harvey sold a part of its low returning forests for a surprisingly strong $441 million, about 10 per cent to 15 per cent above many analysts' estimates.

Indeed, several analysts sharply upgraded their breakup valuations for Carter Holt following the forest sale.

The market's discounted cash flow valuation for the company is in the $2.30-$2.40 range, lower than the breakup valuation range of $2.80-$2.91.

Springford said the company might allow potential bidders for International Paper's stake to conduct due diligence from next month.