CHH worth more in pieces

Sharemarket analysts have pumped up their break-up valuations of Carter Holt Harvey by hundreds of millions of dollars after the company's deal to sell part of its forest estate.

Sharebroker Goldman Sachs JBWere has lifted its break-up valuation of New Zealand's fourth-largest listed company by $471 million - or 36c per share - as a direct result of Friday's deal. It now estimates that a CHH in pieces is worth $2.81 per share - versus the firm's estimate last month of $2.45.

A break-up of the forestry and wood products company is on the cards because majority shareholder International Paper, of the United States, is looking to exit and CHH may be worth more in pieces.

Shares in CHH closed yesterday down 8c at $2.41.

Two other sharebroking firms, Forsyth Barr and ABN Amro, this week lifted their break-up valuations by 21c per share (to $2.83) and 20c per share (to $2.90) respectively.

In a note for clients, Goldman Sachs analyst Doug Smaill said the important signal from CHH's $441 million sale of trees and freehold land was that the price was close to book value. The remaining forests - the bulk of the CHH estate - are on the books at $1.2 billion, the land at $320 million.

At ABN Amro, analyst Dennis Lee lifted his break-up valuation because he believes CHH would pay less tax on a sale of the rest of the estate than he had previously expected.

The tax twist in last Friday's deal was that despite a deferred liability estimated at about $116 million on the forests and land, CHH will be landed with only about $38 million of tax on the deal, due to settle in October.

Most of the assets are housed in a separate company. When CHH sells that company, the tax liability associated with those assets will pass to the buyer, the consortium headed by RREEF Infrastructure, part of Deutsche Asset Management.

CHH says about two-thirds of the unsold forest was held in a similar vehicle.

The company is due to report its half-year earnings tomorrow.