CHH offers a $3.4m goodbye

Carter Holt Harvey's takeover bid for Australian packaging company Wadepack could see the target's managing director pocket A$3.2 million ($3.4 million).

That compares with Carter Holt's valuation of the company at A$85 million.

The forestry giant describes the planned payments to Ashod Nassibian as necessary for a "successful transition" to new ownership.

Carter Holt's offer is A$2.70-a-share in an off-market bid.

A company associated with Nassibian has conditionally agreed to sell 19.9 per cent of the company to Carter Holt and a further 20.6 per cent if the bid becomes unconditional.

The bidder statement released yesterday reveals an employment agreement for Nassibian to stay on for 12 months with pay of A$1.15 million - consistent with his existing package.

He will get an A$1 million bonus if undisclosed criteria for maintaining revenue are met.

On leaving, he will get an A$850,000 payment for agreeing not to compete with Carter Holt Harvey for two years.

Further, Carter Holt plans to pay Nassibian A$250,000 as a consultant for 120 hours of service over three months after he leaves the company.

In the bidder statement, the company said the arrangements would "ensure a successful transition of the Wadepack business following completion of the acquisition".

Carter Holt has been expanding into Australia for more than a decade and is one of that country's top 100 companies by market capitalisation.

It has A$1.26 billion of assets there and reported A$1.5 billion of sales last year.

The Wadepack purchase, if successful, increases Carter Holt's share of the Australian folding box market - cartons without corrugations - to 30 per cent from 18 per cent, ranking it alongside Amcor on 33 per cent.

Wadepack is a client of Carter Holt's Whakatane pulp and paper mill, providing synergies.

Wadepack's products include individual cartons, display cartons, window-faced cartons, blister cards, beverage baskets, tissue boxes, and boxes and lids.

Carter Holt's cash bid is conditional on 90 per cent of shareholders accepting, approvals from regulatory authorities, no big sharemarket fall, and no large dividend declarations or material changes in the company's circumstances.

Carter Holt announced the offer on November 19 and it is open until February 18.

The bidder statement says Carter Holt will save an undisclosed amount by combining head office functions, possibly leading to redundancies.

Carter Holt argues its offer is attractive because it is at a 20.5 per cent premium to the closing price of Wadepack shares before the bid and a 45 per cent premium to the average in the past 12 months.

It says the shares are illiquid and never previously traded at the bid price. The bid is recommended by Wadepack's board in the absence of a higher offer.