Legal battle no bar to selling asset

By PAULA OLIVER

Continuing court action between bitter rivals Citic and Fletcher Forests will not prevent would-be buyers from bidding for the Central North Island Forestry Partnership.

Citic, owned by the Chinese Government, first began court action against its business partner in 1999, eventually alleging that Fletcher Forests mismanaged and overcut the valuable forestry asset.

Despite the partnership's being put into receivership, Citic is continuing to pursue its claims under the name of River 135, a company set up for the purpose.

Receiver Ferrier Hodgson, Fletcher Forests and the partnership's banks argue that this transfer of claim is a breach of the partnership agreement.

A court date has been set down for November, but industry observers the Business Herald spoke to yesterday reiterated that they did not think the litigation would stop Ferrier Hodgson from moving forward with an asset sale.

"I would be surprised if this prevented a sale process, very surprised," a timber analyst said.

"If Citic did make the bid it is rumoured to have made last week, it probably did so because it was worried about things moving slowly. The longer it drags on, the more time Forests has to nail down a partner."

Receiver Michael Stiassny has previously responded to questions about the court action by saying that there is no legal impediment to a sale.

The battle for control of the forestry partnership heated up last week with unconfirmed reports that Citic had put forward a pre-emptive bid.

Speculation was also strong in the market that Carter Holt Harvey was discussing teaming up with Fletcher Forests to ward off the Chinese move.

Analysts yesterday said such a move could run into difficulties with the Commerce Commission.

Another factor in the complicated equation is that Citic is likely to require Overseas Investment Commission clearance to take sole ownership of the forestry assets - and an analyst said it was important to remember that members of the present Government were "mindful of allowing NZ assets to go overseas."

Former Fletcher Challenge chairman Roderick Deane blamed Citic's court action for frightening off potential buyers for Forests during restructuring last year.

Cynics then suggested that the court action was an attempt to derail Fletcher Challenge's greater plans, but Citic remains unrepentant.