'Don't be hasty' over Rubicon offer urges Tenon

By TIM HUNTER

Takeover target Tenon, formerly Fletcher Challenge Forests, yesterday published a letter urging shareholders to take no action in response to Rubicon's $1.85 a share offer.

The letter, from Tenon chairman Sir Dryden Spring, emphasises a lack of premium in the Rubicon offer and highlights efforts by Tenon's management to turn the company around.

"Shareholders should note that the price of $1.85 offers no takeover premium and is only marginally above Thursday's closing prices of $1.82 (ordinary shares) and $1.80 (preference shares)," Sir Dryden wrote.

After the sharemarket closed last Thursday Rubicon announced its intention to increase its Tenon stake from 19.9 per cent to 50.01 per cent through a cash offer of $1.85 a share.

Tenon, whose shares closed that day up 5c at $1.82, is in the throes of a programme returning capital to shareholders, following the sale of its forest assets for $725 million.

Last month the company cancelled one in two shares and returned 62.5c a share.

A further return of $1.15 for each remaining share will be paid when the final forest deal goes through, expected to be in about six months.

The company warned shareholders to "beware of comparisons to previous share prices" because the capital return and one-for-two share consolidation made such calculations "potentially misleading".

It also said Rubicon's offer did not account for higher profit projections.

Hours before Rubicon announced its offer, Tenon upgraded the operating profit forecast for the ongoing businesses from $45 million to $58 million-$60 million for the June year.

The net profit forecast was upgraded from $21 million to about $32 million for the period.

Tenon said yesterday that this produced a per share valuation range of $2.06 to $2.32.

Sir Dryden wrote that the market was "yet to fully appreciate ... the value that is being created in the company, and its strong growth prospects". He "strongly advised" shareholders to await a recommendation from independent directors and a report from the independent adviser.

These would go to shareholders no more than 14 days after Rubicon's formal offer, which was expected between April 22 and May 8.