All change at CHH as Hart holds sway

Graeme Hart

Billionaire Graeme Hart has got full control of forest products giant Carter Holt Harvey and will now move to take it off the stock exchange.

Hart's stake yesterday went past the 90 per cent he needs to compulsorily acquire all outstanding shares. He immediately made the $2.75 a share offer unconditional.

Hart was already partying yesterday - it was his mother's 80th birthday.

But he said he was genuinely happy to have crossed the threshold.

"I am celebrating. It's bloody good."

He said the bid still had a little way to go before it officially closed on Tuesday.

"But we're seeing the momentum that you'd expect to see at this stage of this kind of transaction."

The delisting of the company was "the capital markets at work. If you under-perform for long enough, things change."

CHH has struggled to make money for the past few years due largely to the effects of the high dollar and low commodity prices.

Hart wasn't about to disclose his plans for the company. But he is likely to move quickly to streamline the board of directors and reduce the management head count.

It is also expected that some parts of it will be spun off and sold.

"If it's a good business, it will survive just nicely, but if it's not a good business, it's going to have a few challenges," Hart said of the various divisions.

There was plenty of work to be done "but that's our job. That's what we enjoy doing. We'll just get on and get about it now."

Forsyth Barr forestry analyst John Cairns is picking the first move will be the sale of forests.

"That's probably the easiest and most obvious move," he said.

Investors such as pension funds are seen as more natural owners of forestry investments because they have a longer-term view and are able to look through economic cycles.

Given his track record of restructuring in the food industry, there are expectations that Hart will look to strip costs out of CHH's pulp and paper businesses. But, Cairns said, after six years of restructuring, there probably weren't too many costs left to remove.

In the medium to long term, those businesses would struggle against low-cost competitors in South America. They needed more scale and could be sold off to a larger multinational.

The packaging part of the business was viable and could be in for the most interesting time. Hart has already been tipped as possible buyer of two struggling Australian packaging businesses.

Wood products and lumber divisions were basically commodity businesses. Cairns said that although they were struggling right now, as the dollar fell to around US60c they were likely to become profitable.

Although Hart is famous for moving quickly once he has control of a company there is a possibility of more delays in the takeover process.

If his final stake falls short of 92.8 per cent, then shareholders (who hold at least 10 per cent of the outstanding stake) have the right to object to the price and request the Takeovers Panel to name an independent valuer to set a binding price.

Hart's team were confident yesterday that was unlikely to happen.


Final twist to a story of changing fortunes

The year 2000 was the last really good one for Carter Holt Harvey. That year it posted record sales of $3.2 billion. It was New Zealand's third-largest listed company with a market cap of nearly $3 billion and assets of almost $8 billion. It delivered net profits of more than $200 million.

Since then, it has struggled to deal with the double whammy of the high dollar and low commodity prices, which have combined to depress earnings.

Investors (commonly described as long suffering) have watched their shares, worth almost $5 in the mid-1990s, drift downwards and stagnate below $2 prior to Graeme Hart's original offer of $2.50 last year.

The $3.3 billion wood products company that Hart now owns evolved from a a single Napier saw mill set up by Robert Holt in 1859.

Alexander Harvey started his packaging business - originally metal containers - in the 1880s after the eruption of Tarawera destroyed his dairy farm.

And Francis Carter - renowned at the time as a hard-working axe man - started his lumber business at the turn of the 19th century.

The three companies grew independently through the first part of the 20th century.

Eventually, Holt and Sons merged with Carter Consolidated in 1971 and (after rebuffing the advance of Fletcher Challenge) merged with Harvey and Sons to create Carter Holt Harvey in 1985.

In 1991, when the international banks called in their debt after the first Gulf War, the company was in trouble. Brierley Investments (BIL) took advantage of the situation to get control.

By the end of that year, BIL had brought in American giant International Paper as a minority shareholder.

It quickly lifted its stake to 50.1 per cent - which it held until it sold to Hart last year.