Niggle flares in Tenon takeover

By PAM GRAHAM

The battle for control of wood processor Tenon turned nasty yesterday when bidder Rubicon queried the accuracy of Tenon's defence statements.

Speculation about a North American buyer surfaced, with the usual suggestions of Fletcher Building or Carter Holt Harvey.

But if the speculation comes to nothing, as it has so far, the takeover battle will focus on price.


Tenon's shares closed 6c above the bid price at $1.91 after being as high as $1.94.

Tenon has strongly advised shareholders to wait for advice on Rubicon's $1.85-a-share cash offer for 50.1 per cent of the company.

In a letter to be sent to shareholders, the company says its profit upgrade on Thursday implied its shares were worth between $2.06 and $2.32 each.

GPG director Tony Gibbs said it was nonsense to include foreign exchange gains of $7 million in the earnings multiple calculation.

Without them, the valuation is $1.86 to $2.08 a share.

This takeover is unusual in that the hostile bidder knows the target well because it used to be part of the same company.

Rubicon is also using a capital repayment from its target to ultimately fund its bid.

It wants to move from having influence as a 20 per cent shareholder to control.

The bid gives liquidity to anyone wanting to sell, and will also flush out any other bidders.

Tenon's adviser is ABN Amro rather than Macquarie, the adviser on Tenon's forest sale.

First NZ Capital, the local representative of Credit Suisse First Boston, was Fletcher Challenge's broker for years and it will be interesting to see if it comes up with any bidders.

The forest sale has made Tenon, formerly Fletcher Challenge Forests, bite-sized.

It has processing businesses, investments in distribution networks in North America and a new furniture venture with a Danish company.

Tenon is the largest employer in Taupo, where it has a sawmill and a mouldings and medium-density fibreboard plant.

The second repayment from the forest sale of $1.15 a share is subject to approvals from third-party leaseholders.

Rubicon says that in the letter to be sent to shareholders, Tenon gave the impression it was guaranteed.

Tenon spokesman Paul Gillard said that when the letter was printed it would be made clear that the repayment was subject to leaseholders' approval.