Velas out of race to buy forest

By CHRIS DANIELS forestry writer

Fishing and bloodstock tycoons Philip and Peter Vela have dropped out of the race to buy the Central North Island Forest Partnership, leaving the way clear for Fletcher Challenge Forests and its Chinese partner Citic.

The Waikato-based Velas were surprise contenders for three mills and 190,000ha of forest between Taupo and Rotorua, being sold by receiver Michael Stiassny.

Confirmation of the Vela withdrawal was made in a brief faxed statement from Stiassny: "The receivers of the Central North Island Forest Partnership [CNIFP] announced today that the agreement with the Vela C. N. I Forests Ltd had been terminated by mutual agreement after the Velas decided they did not wish to pursue the purchase any further."

The Velas' lawyer, Clive Bradbury, said he had nothing to add to Stiassny's statement.

When Fletcher failed last month to meet a financing deadline imposed by the receiver, a back-up deal involving the Vela brothers was invoked.

Despite their wealth and acknowledged business acumen, there was widespread scepticism about the Velas' ability to raise the finance - $1.4 billion, equivalent to CNIFP's debt, was seen as a minimum price.

Their withdrawal means Fletcher will be back negotiating with Stiassny, a relationship that went through a rocky patch last month.

Stiassny disputed the assertion that Fletcher had to extend a financing deadline imposed by him, a request which they said he refused.

Fletcher chief executive Terry McFadgen later said he had not exactly asked for an extension, but that was only because Stiassny had made it clear that any such request would be rejected.

Two weeks after Fletcher pulled out of the sales process, it said it had "reached understandings" with Citic to buy the CNIFP.

Chinese Government-owned Citic planned to inject $439 million of equity into Fletcher at 37c a share. McFadgen said a new loan of $550 million was being arranged, with $450 million to be used to buy the CNIF and the rest used to "refinance its own estates".

In a side deal to Citic investing in Fletcher, listed company Rubicon will sell its 17.6 per cent stake in Fletcher, receiving a Fletcher forest rather than cash for its shares.

If finalised and approved by shareholders, Citic would become Fletcher's cornerstone shareholder, owning 35 per cent of the company.