Rival bid upsets deal on Energy

By PAULA OLIVER

Fletcher Challenge executives were burning the midnight oil last night evaluating a rival bid for their Energy division from little-known Greymouth Petroleum.

The move by Greymouth, headed by businessman Mark Dunphy, ended weeks of rumour suggesting a counter-bid to that of Royal Dutch Shell and Apache Corporation.

It also cast a cloud over one of the country's largest business deals, struck last October after lengthy negotiations.

Greymouth Petroleum revealed it was part of a consortium, Peak Petroleum Company of New Zealand, which includes Sir Ron Brierley's Guinness Peat Group, FR Partners, and leading local and overseas institutional investors in Fletcher Energy.

Greymouth did not identify all the investors, but Mr Dunphy said they include some of the country's best-known private investors.

The consortium's bid for Energy includes a minimum $US3.70 cash offer for each share, topping Shell's bid of $US3.34.

Aside from the cash difference, the rival bid is identical to that of Shell - meaning shareholders will still receive one Capstone Turbine share for every 70 Energy shares, and one share in new Fletcher vehicle Rubicon for each Energy share.

The offer is subject to due diligence, and Peak Petroleum's partners have appealed to Fletcher bosses to let them see the books immediately.

They say the cash offer could be increased after due diligence is completed, and have asked that Fletcher Challenge delay its shareholder vote meeting from next Tuesday to March 23.

Long-term, Peak Petroleum would seek to list on local and overseas stock exchanges, and run Energy's New Zealand and Brunei assets as an ongoing business. It would not be subject to the Commerce Commission restrictions requiring Shell to sell some of the assets.

Energy shareholders would be offered the chance to buy into Peak Petroleum, or take the higher offer price, Mr Dunphy said. The Canadian and Argentinian assets would be sold to Calgary-based Penn West Petroleum Ltd, which is also backing the consortium financially.

The offer comes months after analysts began to question the value of Shell's bid. Initially worth $4.6 billion, and $11.22 a share, the offer has lost value for shareholders as the Kiwi dollar recovered and Capstone Turbine fell prey to the volatile Nasdaq market.

An analyst yesterday estimated Shell's offer is now worth $3.157 billion, or $9.12 a share. In comparison, Greymouth's offer would be worth $3.447 billion, or $9.96 a share.

Broker Forsyth Barr, which last week recommended its clients vote down the Shell offer, saw the value of Energy's Canadian assets as particularly contentious. Gas prices had soared in North America in recent months, and Shell was in line to get a bargain, the researchers said.

"It's encouraging Greymouth has come forward and stumped up with a better bid, but it's still good value for them," Forsyth Barr's Rob Mercer said. "It has been frustrating to see the Shell deal go unchallenged by the board, institutions and Grant Samuel for so long."

But another analyst, who asked not to be named, said it was a question of having one solid bid from Shell against a less firm one from Peak Petroleum. If Fletcher agrees to delay its meeting to March 23, the day the Shell bid expires, it risks ending up with nothing should the Peak offer fall over after due diligence, he said.

Fletcher Challenge managers, clearly frustrated by the rumours surrounding the extremely late bid, must now decide if the new offer has substance. They will evaluate its overall value and fairness for shareholders, its financial reliability, and the ability of the bidder to deliver on Energy's ongoing obligations.

The future of all Fletcher Challenge's divisions hang on the Energy deal. If it is delayed, establishing Forests and Building as standalone businesses will also be delayed.

Fletcher Challenge has not yet indicated whether it will delay its shareholder meeting, or allow Peak Petroleum to do due diligence.

Mr Dunphy said he was motivated by wanting to keep the local assets New Zealand owned.

"The Shell deal wasn't a good deal from the moment it was made," he said. "I'm pleased to have this group around me, and we are dedicated to achieving a win here. We will succeed."

Shell Australia executives yesterday said they were confident the company's bid to take over Woodside Petroleum Ltd would succeed despite widespread opposition.

The company dismissed fears an attempt to increase its stake in Woodside to 56 per cent from 34 per cent would be against the national interest, saying it would raise Australia's game.

Critics of the takeover are concerned a Shell-controlled Woodside might face a conflict of interest over its gas developments in the region, and give Asia priority over Australia.

The row has placed the Federal Government under increasing pressure to block the approval of the Foreign Investment Review Board, which was given up to 90 days extra to consider the offer.

Woodside shares are down 10c at $A14.10. BHP was up 61.5c at $A21.085.