Dunedin City launches bid for Opio

By PAM GRAHAM

The Dunedin City Council became a corporate raider yesterday, launching a $12.7 million bid for listed Otago and Southland forest owner Opio Forestry Fund.

City Forests, a council wholly owned trading arm, is offering 85c a unit for Opio's 14.96 million units.

The price is 53 per cent more than the average closing price in the last three months but below the $1.02 net asset backing.

City Forests reckons the 10 per cent discount rate and log price assumptions underlying the asset backing figure are high.

The council unanimously supported the expansion in forestry investment at a time when others are getting out.

The Fletcher Challenge estate has been sold to foreign funds and Auckland property investors and Carter Holt Harvey's is under review.

"Every forest is a good forest at the right price,"City Forests' chief executive Phil Taylor said, adding the bid was not intended to be hostile.

Opio has little trading income until harvesting starts in 2008. It has four, mostly radiata, forests and City Forests managed some of them until 1997.

City Forests is advised by Forsyth Barr and the Dunedin broking firm's clients dominate Opio's register.

US-based Lionel Hastings Revocable Trust is the biggest unitholder, with 2.9 million, and accounts for most of the foreign-held holdings. The remaining investors are spread throughout the country and are mostly individuals or families.

City Forests has 15,300ha of forests and the acquisition adds 1359 stocked hectares.

The council-owned company made a 6.85 per cent return on shareholders' funds in 2003 and it has invested in forests in the region since 1908.

Opio is managed by Perpetual Trustees. It advised investors not to sell pending advice.

The bid is conditional on getting 75 per cent acceptances and it lasts for four weeks between August 4 and September 3.