Fletcher break-up costs $271m

By PAM GRAHAM

Breaking up in the corporate world is not just hard to do, it is expensive.

The cost of breaking up Fletcher Challenge - a job completed with the renaming of Fletcher Challenge Forests - is well over $200 million.

The money has mostly gone to advisers, bankers and lawyers, though on Friday $8.5 million went to timber management company The Campbell Group as the second half of a $17 million break fee for missing out on buying Fletcher's forests.

The break-up proper of the Fletcher Challenge conglomerate started with a December 1999 decision to dismantle its targeted share structure and separate into four divisions.

In 2000, the paper business was sold to Norske Skog. But 2001 was the big year of change.

In 2001, Fletcher Building became a standalone publicly listed company, Fletcher Challenge Energy was sold to Shell and Apache Corporation, and Rubicon was listed. The continuing businesses of Fletcher Challenge were renamed Fletcher Challenge Forests.

The company's annual reports show restructuring and separation costs of $119 million in the June 2001 year for non-forest businesses and $63 million for separating the forest business from the targeted share structure.

A breakdown of the $63 million shows lawyers and consultants got $27 million, bankers got $16 million in debt break costs and $12 million went on loan establishment costs.

The cost of this year's forest sale is $44 million, including the $17 million break fee to Campbell.

There were also costs of $19 million in the June 2000 year associated with the separation of the targeted share structure and $26 million of costs associated with the September 1999 proposed merger of Fletcher Challenge Paper and the group's 50.8 per cent owned subsidiary Fletcher Challenge Canada.

Last Friday, shareholders voted to take the break-up a step further by selling most of the forests.

The Fletcher Challenge Forests business was mind-bogglingly complicated, chairman Sir Dryden Spring told shareholders.

The company name became Tenon on Friday, further cutting the link with the Fletcher Challenge past.

By the end of this week, Tenon will collect $560 million from the sale of all but 20,700ha of the company's 107,000ha forest estate.

The quality of the leftover processing, marketing and distribution businesses will no longer be obscured by underperforming forests, Sir Dryden said on Friday.

The question on investors' minds is what happens next. Grant Samuel warned shareholders in an independent report on the forest sale that the residual business will be a more attractive takeover target.

Restructuring costs

1999 - Fletcher board decides to separate the four divisions - Building, Energy, Forests and Paper.

2000 - Paper sold to Norske Skog.

Costs of $45 million incurred.

2001 - Fletcher Building becomes separate listed company, Fletcher Energy sold to Shell/Apache. Rubicon created as listed company. Remainder of Fletcher Challenge becomes Fletcher Challenge Forests.

Costs of $182 million incurred.

2004 - Fletcher Forests sells most of its forests, renames itself Tenon.

Costs of $44 million incurred.

* Estimated total costs $271 million