Fletcher fate hangs on appeal

By PAULA OLIVER Energy writer

Fletcher Challenge's crucial shareholder meeting hangs in the balance this morning, as all parties await a ruling from the Court of Appeal.

Peak Petroleum made a last-ditch attempt to delay the meeting yesterday, when it appealed against last Friday's High Court ruling that the meeting should proceed. The High Court had also denied Peak immediate access to Fletcher Energy's books for due diligence.

Three justices heard Peak's latest submissions in Wellington yesterday and will reconvene at 9 am today to hear Fletcher's case.

Peak is racing against time to halt the meeting, which promises to be a fractious encounter.

The new consortium stunned the market last week when it made a late proposal to buy Fletcher Energy - a move that threatens to derail Fletcher Challenge's plans for separating the group's three divisions.

Peak is headed by oil and gas businessman Mark Dunphy and backed by Sir Ron Brierley's Guinness Peat Group, FR Partners and several local and international investors.

Its battle to buy Fletcher Energy appears to lie in the hands of Fletcher Challenge's shareholders, who will today vote - pending court approval - to approve or decline a Royal Dutch Shell and Apache Corporation bid for the high-performing division.

In doing so, they will also determine the fate of Fletcher's entire separation process, including the establishment of Building as a standalone company.

A handful of local fund managers who hold Energy shares indicated yesterday that they would go to the meeting and decide which way to vote on the day.

Fletcher Challenge was remaining silent yesterday at the prospect of the vote, although the deadline for postal and fax votes passed on Sunday afternoon.

Fletcher executives have urged voters to support the Shell deal, because it is the only firm offer they have. The company's directors yesterday published the findings of a report commissioned from Grant Samuel, which appeared to back the Fletcher Challenge case.

The separation of the industrial icon began in December 1999, when the board said it intended to unravel the letter stock structure. After a lengthy process involving due diligence on all divisions, it sold Paper to Norske Skog last July, and revealed its intentions for Energy, Forests and Building in October.

Shell spokesman Antonius Papaspiropoulos said the oil giant was confident that shareholders would support its offer for Energy.

"We're acutely aware we have the financial resources to make this happen immediately," he said.

"Our bid secures payment by the end of the month, and there's not any rival bid that is able to do that."

Peak Petroleum's Mr Dunphy was chasing support in Taranaki on Sunday, while looking at the latest developments at the Pohokura field.

Peak has not indicated how much support it has, but paints itself as a shareholder-driven proposal.

Mr Dunphy is urging local shareholders to stand up and be counted, and not sell to Shell at the price offered.

Many analysts see the vote as too close to call, although as much as half of Energy is now being held by arbitrage players keen to sell and make a quick buck.

Armstrong Jones' senior investment manager, David McClatchy, said events were changing so regularly that it was premature to make an assessment before the meeting.

"I think it's a balance between having something confirmed as unconditional on the table, along with the secondary effects of the Fletcher group break-up, versus the assessment of whether the conditional proposition is material enough to sway one the other way."

Energy has 47,000 shareholders, but its ownership is difficult to pinpoint because the shares are widely held and there are no stakes over 5 per cent. At December 31 almost half of the company was held by three nominee companies, which hold shares on behalf of other investors.

But brokers say the Energy holdings have changed markedly in recent heavy trading.

Meanwhile, Fletcher Challenge's new arrangements for its capital notes holders were passed almost unanimously in Auckland yesterday.

Today's meeting will be at 2 pm at the Ellerslie Convention Centre, if the court allows.