Time on Hart's side say analysts

Graeme Hart has time on his side to mop up the remaining 9 per cent of Carter Holt Harvey he needs to take full control, but remaining shareholders may hang on to their shares in the hope of a company turnaround, analysts said on Monday. Hart, the country's richest man, has extended his $3.3 billion offer for New Zealand's largest forest products company three times, on Friday calling a December 9 deadline, after increasing his stake to 81.4 per cent from 71 per cent at the last extension in early November.

At 90 per cent, he can compulsorily buy the rest of the shares at the $2.50-a-share offer price and delist the company.

"I still think he'll struggle, but obviously there's potential for him to continue extending it as well," said James Lindsay of fund managers Tyndall Investment Management, which still holds Carter Holt shares.

Hart's Rank Group can keep the offer open for up to 150 days, until early February.

Hart bought International Paper's 50.5 per cent stake in Carter Holt in August, triggering an automatic full takeover offer on September 14.

Despite Carter Holt's disappointing performance and poor share price in recent years, many shareholders were initially reluctant to sell and sought to benefit from Hart's previous business successes, such as turning around Australian food products company Burns, Philp & Co.

However, a series of profit downgrades and a recommendation to sell by Carter Holt's independent directors, appear to have made taking the money attractive to many retail investors.

The majority of the remaining shareholders are institutions based in New Zealand, the United States, Britain and Australia, some of which are long-term holders and may hang on in the expectation Hart will turn the company around and they can share in the benefits. The balance is made up of retail investors and hedge funds.

This afternoon shares in Carter Holt were trading up 1.6 per cent at $2.50, having fallen below the offer price to close on Friday at $2.46. An average of five analysts value Carter Holt at $2.80 per share on a break-up basis, or a total $3.67 billion.

Institutional investors are balancing possible Rank Group improvements against Carter Holt's product prices being at cyclical lows.

Goldman Sachs JBWere recommended investors hold their shares, valuing Carter Holt up to $4.32 per share in the long term as factors such as pulp prices improve.

"Rank has a strong track record of opportunistically acquiring out-of-favour commodity businesses, initiating fundamental operating improvements, and then crystalizing value as cyclical factors recover," GSJBW analysts said.

The success of Hart's offer has also led to a decline in shares tradeable on the market, resulting in the NZ Stock Exchange reducing the weight Carter Holt holds in its indices.

Morgan Stanley Capital International Inc is deleting Carter Holt Harvey from its indices on Monday, and index trackers can be expected to reduce their holdings accordingly.

- REUTERS