Pressure on Hart to up his Carter Holt offer

Carter Holt Harvey shares remain fixed above Graeme Hart's $3.3 billion, $2.50-a-share takeover offer as hedge funds tried to goad the billionaire to offer more, a source said yesterday.

The source said hedge funds hoped their buying would help build a constituency of investors who believed the forestry giant was worth more than Hart was offering.

Hedge funds use a variety of financial instruments to focus their often high-risk investments on special situations. A strong rise in the CHH share price and sizeable volumes would indicate support for their move.

The shares closed yesterday down 1c at $2.55, while a robust 17 million shares, or 1 per cent of those on issue, have changed hands since the start of the week.

"Hedge funds can take a punt on a relatively small outlay and then make a decision to sell before the offer lapses," the source said.

Hart could let the offer lapse when it expires tomorrow and then launch a new bid as soon as the start of next week at a higher price, although this is discounted by most observers.

At the close of play yesterday, he had 85.54 per cent of the shares, within a stone's throw of the 90 per cent threshold when he can compulsorily acquire the outstanding shares.

Hart declined to comment yesterday.

Views have have been mixed since the bid was launched as to whether Hart was likely to win full control. Initially it was considered unlikely as numerous investors took a punt on Hart's strong track record.

However, late last year shareholders were prompted to accept the offer by CHH's poor quarterly result, the independent directors' recommendation to sell and CHH's reduced weighting in share indices.

Brook Asset Management principal Simon Botherway told NZPA this week: "I think they have soaked up as much as they are going to get around the $2.50 mark."

Market players believe Hart's private company Rank will extend the offer for the sixth time tomorrow in order to let the bid run its course. Rank can keep the bid open until February - 150 days from the offer's launch on September 14 .

Broker Brian Stewart, of Forsyth Barr Frater Williams, expects another extension given that Rank was so close to compulsory acquisition.

He said people were buying shares in CHH on the view that Hart would turn the company around, rather than as a greenmail bid to try to force out a fresh bid at a higher price.

Forsyth Barr does not expect any quick turnaround at CHH and believes Hart will have his work cut out to extract greater value out of the company by breaking it up.

"We think it is quite difficult and a lot of things are out of his control."