Option bar stirs Rubicon

By PAUL PANCKHURST

A Guinness Peat Group takeover play would just not be the same without the corporate raider injecting some fresh and unexpected complication into the mix.

On Friday, GPG unveiled a 75c-a-share partial takeover offer for forestry and biotech company Rubicon, seeking to lift its stake from 19.9 per cent to 52 per cent.

Rubicon holds a 17.6 per cent stake in Fletcher Challenge Forests and is at the centre of GPG's "vision" - yet to be detailed - for remaking the forestry industry.

The extra complication is in a detail of GPG's offer: a condition requiring Rubicon not to issue any share options while the offer is on the table.

It turns out that Rubicon's non-executive directors are owed for their work during the 2001-02 financial year - with that payment to be made entirely in the form of share options.

In their report to shareholders on the GPG offer, Rubicon's independent directors said Rubicon had a contractual commitment to issue the 5,017,022 options.

They also said GPG knew of this commitment before making its offer.

GPG director Tony Gibbs (at left in graphic) said issuing the options "would fly in the face of our offer - and we've told them it's not acceptable behaviour".

Rubicon director Luke Moriarty (at right in graphic) would not say whether the options would be issued. That was "hardly the issue".

The real issue, he said, was GPG offering 75c a share when an independent valuation from Grant Samuel said Rubicon was worth from 98c to $1.28 a share.

The smart money is on Rubicon holding back from issuing the options while GPG's offer is live - to avoid being dragged into an argument over a side issue or blamed for killing the offer.

The offer and two documents knocking it - the independent directors' report and the Grant Samuel report - were sent out to shareholders on Friday. The independent directors said shareholders should reject the offer as too low.

Talking to the Herald, Moriarty spoke of "not a gap, but a chasm" between the offer price and the value of the shares.

In its letter to shareholders, GPG said the enlarged Rubicon shareholding would provide a platform "to launch GPG's strategic vision for the New Zealand forestry industry".

The offer is open until October 24 and is for 40 per cent of the outstanding shares in Rubicon.

On the topic of the non-executive directors' share options, the report from the independent directors to Rubicon shareholders said the issue price would be 7c an option, with each option entitling the holder to one Rubicon share.

The options could be exercised in the five years from March 31, 2004 - or earlier in "certain situations".

The GPG offer is one of those "certain situations". The exercise price was 63.72c an option in 2004 - or 50.53c now.

Your slip is showing

Ever wondered if the expert reports on company takeover offers are little more than "cut and paste" exercises?

Rubicon shareholders will be.

On Friday, the company sent out the report from independent valuation firm Grant Samuel on Guinness Peat Group's partial takeover offer.

Buried deep in the cautionary passages explaining the assumptions underlying the report was something quite strange.

Talking of future profits and cashflows, the report said: "Forecasts are inherently uncertain and this is particularly so in the case of the intimate apparel sector."

Intimate apparel? Rubicon's business is forestry and biotech.

Where could this have come from?

Here is a good guess: an old Grant Samuel report on Bendon.

Oops.