Carter Holt quiet on talk of big deal

By PAUL PANCKHURST AND NZPA

Corporate giant Carter Holt Harvey is believed to be on the verge of announcing plans to sell a big chunk of the company.

Speculation centres on the tissue division, which boasts household name brands on both sides of the Tasman - Sorbent, Purex, Treasures and Libra.

The company refused to comment yesterday, but the Business Herald was told an announcement on a sales process was possible within two weeks.

In the past financial year, the tissue division contributed earnings before interest and tax of $51 million - or 15 per cent of the $333 million total.

On an earnings multiple of 10 to 13 that would have translated into a value of $510 million to $663 million.

One question posed by sharebrokers yesterday was: why sell a stable and solid performer when other parts of the business face difficulties (forests) or are highly cyclical (the exposure to building products)?

There was no answer from the company yesterday, however.

Spokeswoman Dellwyn Stuart said Carter Holt routinely reviewed its activities and would not comment on "speculation".

Last month the company said a cashflow-based return on investment measure showed the tissue division making 10.5 per cent - compared with forests at 3 per cent, pulp and paper at 6.4 per cent, wood products at 10.8 per cent and packaging at 11.1 per cent.

Chief executive Peter Springford has been reviewing the company's businesses since he took over last December. One goal has been for the company to meet its cost of capital.

AMP New Zealand equities portfolio manager Nat Vallabh told the Bloomberg news service that the tissue business was "non-core" and likely to be a candidate for sale.

Bloomberg reports that the division's sales have declined in the past two years.

The Australian Financial Review reports that Carter Holt's adviser, Credit Suisse First Boston, was examining a trade sale and the alternative of a sharemarket float.

Buyers for the tissue unit could include Johnson & Johnson, Procter & Gamble and Unilever NV, the newspaper reported, but Kimberly Clark Corporation could be barred by competition concerns.

The tissue business makes Sorbent and Purex toilet tissue, Handee paper towels, Treasures nappies, and Libra female hygiene products.