Edgy Fletcher Forest investors call for action

By CHRIS DANIELS

Pressure is building on Fletcher Forests to bring the sorry saga of the Central North Island Forest Partnership to an end as shareholders grow increasingly nervous about their investment.

Fletcher and former partner Citic are in the final stages of buying the massive Central North Island Forest (CNIF), which they both owned before it went into receivership more than a year ago.

Adding to shareholder concerns is the looming deadline imposed by receiver Michael Stiassny, who has reportedly given Fletcher until the end of this week to finalise its offer for the forest estate.

Fletcher's major institutional shareholders are thought to be worried about the effect another failure by Fletcher management to buy the forest would have on the already battered share price.

The company was in exclusive talks with Stiassny in April, but these broke down over the issue of a deadline extension.

The new deal centres on the Chinese Government-owned Citic injecting $439 million of new equity into Fletcher at 37c a share. A new loan of $550 million is being arranged, with $450 million to be used to buy the CNIF, and the rest to "refinance its own estates".

In a side deal, listed company Rubicon will sell its 17.6 per cent stake in Fletcher, receiving a Fletcher forest, rather than cash, for its shares.

If finalised and approved by shareholders, Citic would become Fletcher's cornerstone shareholder, owning 35 per cent of the company.

But while shareholders are impatient at the delay, it does have an upside.

The price of the 190,000ha forest is denominated in US dollars and the rising kiwi is lowering Fletcher's bill by the day.

The appreciating currency has sliced more than $175 million, or over 6c a share, off the January price of $1.5 billion.

"The whole thing has been a long, drawn-out saga that has really sapped the patience of investors, especially the institutions," said Macquarie Equities analyst Arthur Lim.

Many institutional shareholders had bought Fletcher shares because they thought the company stood a good chance of buying the CNIF.

"It stands to reason the institutions would be saying, 'look we have a further opportunity, let's not miss out on this one'," said Lim.

"The flip-side of them not getting it this time would be a bit too ugly on the share price to contemplate."

Nat Vallabh, portfolio manager and senior analyst at Fletcher shareholder AMP Henderson, said he was not aware of any pressure on Fletcher management to close the deal, but shareholders were certainly keen to see the issue resolved.

Vallabh said he would like to study the proposal once more details became public to see if it would, in fact, benefit shareholders.