Rubicon chief sees expansion but shareholders incensed

By PAM GRAHAM

Promises of a bright future for the former Fletcher Challenge forestry businesses in furniture and other high-value markets failed to quell sadness about their past performance at Rubicon's annual meeting yesterday.

It was disclosed that Tenon, the former Fletcher Challenge Forests company now controlled by Rubicon, is looking to add windows, doors and furniture to its clearwood and mouldings offerings in North America and expand in Europe.

This is a strategy that was promised for years by Fletcher companies.

"It would not be right for me to announce the Tenon strategy to you today," Rubicon chief executive Luke Moriarty said.

But he continued: "We see Tenon investing capital to enhance the efficiency of existing production, expand the product range, improve the supply chain and to increase Tenon's in-market presence closer to the customer."

Tenon is set to announce its annual profit on Friday.

The prospect of an expansion, rather than an ongoing breakup of the Fletcher Challenge empire, did not stop challenges from the floor of the subdued Rubicon meeting.

Oliver Saint, of the New Zealand Shareholders' Association, rose to say "with sadness" that no member of the association's board supported the re-election of Hugh Fletcher as a Rubicon director.

"He inherited a massive empire and, during his tenure, shareholders have lost an awful lot of equity."

The history of Fletcher Challenge is a long one and everyone has a view. From a separation into targeted stocks, the blue-chip conglomerate was broken into different companies and Fletcher Building and Tenon remain listed. Rubicon is an investment company holding former Fletcher assets, the biggest of which is the investment in Tenon.

In April, Rubicon moved to take control of Tenon, launching a partial bid that succeeded at $1.95 a share.

"We are confident that time will show $1.95 per share to be an attractive acquisition price for Rubicon," Moriarty said.

There has been much speculation that Tenon will be broken up, with Carter Holt Harvey buying the sawmills making timber framing and other structural products for the building industry.

Tenon has sold its forests, leaving sawmills, wood-moulding plants, a distribution network in North America and a furniture joint venture in Europe.

Bloomberg data shows that Rubicon has provided investors with a 39 per cent return in the past year and Tenon a 56 per cent return.

Moriarty said the market still undervalued Rubicon's forestry bio-technology business and ascribed no value to an Argentine joint venture, Forestadora Tapebicua. Up to 20c a share could be added to the Rubicon share price if the biotechnology operations were valued in line with an analysis by Grant Samuel.

Shareholders asked when the company would pay dividends and Moriarty said it had first to repay $70 million of debt from the Tenon takeover.

The meeting re-elected Fletcher and Moriarty, reappointed auditors and voted on a change to the constitution.