Fletcher waits for decision

By SIMON HENDERY

A High Court judge has reserved his decision on the crucial question of whether major shareholder Rubicon is entitled to vote on Fletcher Challenge Forests' controversial Central North Island Forestry Partnership deal.

Proxies from small shareholders have flooded in over the past few days - ready for the Tuesday meeting at which the proposal will be put. But the 17.6 per cent of shares owned by Rubicon could decide which way the vote goes.

US-based Fletcher shareholder Xylem Investments went to the High Court at Auckland yesterday to argue that Rubicon was a related party and therefore should not be allowed to vote on the US$650 million ($1.4 billion) deal.

If the deal does go ahead Rubicon will be able to sell its Fletcher shares for cash and trees worth an estimated 37c a share compared with the market price which has fluctuated around 23c.

Xylem, which owns 7.3 per cent of Fletcher, has vehemently opposed the package, arguing that the price being paid for the forests is too high, the debt burden will be too heavy and Rubicon's exit package is too generous.

Justice Hugh Williams yesterday heard three hours of legal argument from lawyers for Xylem, Fletcher and Rubicon.

Fletcher's counsel, Jim Farmer, QC, submitted that the issue was essentially about a shareholder's right to vote.

"The fundamental starting point is that the right of a shareholder to vote - a property right - should not as a matter of construction be excluded even where that shareholder has an interest in the transaction," Dr Farmer said.

The argument centred on different interpretations of Fletcher's constitution, the Stock Exchange listing rules, and the relevance of a market surveillance panel ruling on the issue released on Thursday.

On Wednesday the panel said it was not appropriate to comment on the issue of voting restrictions at the meeting, given that the matter was before the court.

But on Thursday, at Fletchers' request, the panel released a ruling that under the exchange's listing rules no Fletcher shareholders, including Rubicon, should be restricted from voting at the meeting.

Justice Williams said he would release his decision either over the weekend or on Monday.

Meanwhile, a pointer to which way the debate may be swinging came when another significant Fletcher shareholder, AMP Henderson Global Investors, said yesterday that it would vote in favour of the deal at the shareholders' meeting.

"Based on the information that we have to date, and it may change depending on what eventuates between now and the meeting, we will still be supporting the transaction," Nat Vallabh, AMP Henderson portfolio manager, said.

AMP Henderson, which owns less than 5 per cent of Fletcher Forests, initially came out in favour of the deal but had been reconsidering.

Support from 75 per cent of those voting is needed for the deal to go ahead, and Vallabh said the result could go either way.

Exact numbers were not available yesterday, but it is understood that proxies are flooding in, in numbers not seen very often, even for special meetings.

Of the company's small shareholders who have so far returned proxy forms, the vast majority are believed to be against the deal proceeding.

Fletcher Forest shares closed up 1c at 24c, and Rubicon shares were up 1c at 72c.