Watchdog makes Fletcher lay cards on the table

By CHRIS DANIELS

Fletcher Challenge Forests' $1.3 billion plan to buy the Central North Island Forest has prompted the Stock Exchange's market surveillance panel to bare its teeth.

The panel has made strict demands for information from Fletcher, saying shareholders must be told about all aspects of the deal before being asked to approve it.

Fletcher and the Chinese Government-owned Citic, through a Hong Kong subsidiary company Seawi, want to buy the 163,000ha Central North Island Forest from receiver Michael Stiassny.

In an announcement to the Stock Exchange yesterday, the panel said there had been numerous inquiries from investors and other third parties about the deal.

It said that along with the normal disclosure and pricing information, Fletcher shareholders must be told about Seawi's operational and strategic plans for Fletcher and Seawi, along with a "full corporate and financial history" of the Hong Kong-listed company.

Shareholders Association chairman Bruce Sheppard said the panel's announcement and demand for such wide-ranging information was "wonderful, unprecedented - they're doing a great job".

Sheppard said the new chief executive of the Stock Exchange, Mark Weldon, appeared to be living up to his word and bringing a new attitude to enforcing the rules.

Citic is using Seawi as its vehicle to buy its 35 per cent stake in Fletcher and this week raised its Seawi shareholding to 40 per cent.

Another piece of interesting reading requested by the surveillance panel is copies of "any correspondence between FFS [Fletcher] and Xylem Investments in relation to the recent resignation of Xylem Investments' director from the board of FFS".

This relates to Stephen Hurley, who resigned from the Fletcher board in protest at the Citic deal, saying it was not fair and reasonable for minority shareholders.

Xylem owns 7.6 per cent of Fletcher shares.

The panel also wants shareholders to be given information on "any other arrangement or contract Seawi may have with associated parties to the transaction".

It also announced yesterday that it would not grant any waivers of its rules in relation to the Central North Island Forests deal.

Fletcher company secretary Paul Gillard said that a formal notice of meeting and explanatory memorandum were being finalised and should be sent out to shareholders by the middle of next month. A special shareholders meeting is scheduled for mid-August.

Grant Samuel and Associates has been appointed by Fletcher to prepare the independent reports on the forest deal.

Panel secretary Philippe Leloir said there was nothing unusual in the announcement, which was a response to a letter from Fletcher.

The panel was telling Fletcher what it thought was required to be included in any notice of meeting. This did not signal any new policy from the panel.

"It is no different from what is routinely asked - some cases demand more information, others not so much. It's all dependent on the transaction involved."

He would not say whether Fletcher had asked for a waiver from any listing rules.

Sheppard said Fletcher had been preparing to ask for a waiver relating to the role of Rubicon in approving the forest deal.

He said Rubicon should not be allowed to vote in the main resolution approving the forest purchase as it was connected to another, ordinary resolution.

That resolution was the "side deal" - allowing Rubicon to get out of its 17.6 per cent shareholding in Fletcher, in exchange for cash from Seawi and a forest from Fletcher. This values the shares at 37c each. They closed yesterday on the New Zealand Stock Exchange at 24c each, up 1c for the day.