Fletcher Forest price drops as talks fail

By GEOFF SENESCALL

Fletcher Forests' share price was felled yesterday amid speculation that the debt-laden company will undergo a major recapitalisation after sale talks foundered.

Fletcher has been in negotiations with Citic, its Chinese joint venture partner in the Central North Island Forestry Partnership.

But it is understood that the pair - in dispute over the partnership's management contract with Fletcher Forests - have been unable to patch up their differences.

Fletcher is understood to have decided to pull the plug on discussions which included a sale to Citic.

However, Fletcher Challenge spokeswoman Ginny Radford would not comment last night when asked if the deal was dead.

A Citic spokesman said earlier that no progress had been made, andit was moving to a court resolution.

Fletcher Forests' share price yesterday tumbled 6c to 72c as the market started talking about a possible rights issue. But an alternative is for a placement of shares to a cornerstone shareholder.

Brokers estimated Fletcher Forests would need up to $300 million to shore up its balance sheet.

Resolving issues around Fletcher Forests is the key to the restructuring of the rest of the group, which includes Fletcher Energy and Fletcher Building.

Meanwhile, shareholders in Australian oil explorer Petroz have rejected a proposal that would have handed control of the company to Fletcher Energy.

A meeting of shareholders held yesterday to seek approval for a Fletcher Energy proposal that would have seen it take at least a 33.7 per cent stake in Petroz, and underwrite a rights issue, overwhelmingly voted against it.