By GEOFF SENESCALL
The outcome was bitter-sweet yesterday for shareholders in the Fletcher Challenge group as the long-awaited restructuring was announced.
Fletcher Energy shares rocketed to $10.01 before settling back at 924c (a gain of 139c a share) as the market grappled with the complexities of an $11.22 a share bid from Royal Dutch Shell and United States-based Apache.
Souring the happiness, Fletcher Building and Fletcher Forests both tumbled on the news that they would not now be sold, falling 15c to 205c and 12c to 50c respectively.
Disappointment seemed to be strongest at the Building decision. Speculation had been running high in recent weeks that Fletcher Challenge had received a cash offer of 300c a share for Building.
Fletcher Challenge chairman Dr Roderick Deane would say only that it had received one indicative offer for Building, and several serious expressions of interest. But the price did not meet the board's view of value.
Simon Botherway, of Arcus Investments, said he would be "absolutely dismayed" if the board had rejected a 300c offer.
A sale at that price would have been the most value-enhancing move for shareholders, he said.
But Dr Deane did say that once Building was separated there would be no restrictions on anyone making a bid for the company.
Yesterday's announcement effectively marks the dismantling of the country's largest industrial conglomerate.
The decision to separate the remaining Fletcher divisions from the group was made by the board last year, after years of underperformance.
Fletcher has already sold its largest division, Fletcher Paper, to Norske Skog of Norway for $5 billion.
Under an indicative timetable the separation of the remaining assets from the Fletcher group will be completed by the beginning of February. Fletcher Challenge will then cease to exist.
The main obstacles are shareholder approval, to be sought in January, and a ruling from the Commerce Commission on Shell's purchase. That ruling is expected by the end of the week.
Brokers and analysts will be poring over the details of the very complex restructuring in coming weeks.
What is already clear is that Fletcher Energy is the lynchpin of the process.
Through the creation of an offshoot called Rubicon (meaning the point of no return), Fletcher plans to hive off assets not required by Shell. Rubicon is also being used to recapitalise Fletcher Forests to the tune of $170 million.
Nigel Scott, of ABN Amro, said the main questions revolved around how Rubicon was going to work. "Obviously it ends up with some Capstone shares, which it can't sell for a while, and it is seen by the market as a dumping ground for some of the extra stocks," he said.
Then there was the question of what the Commerce Commission might ask Shell to give up.
"Fletcher Challenge has come up with a structure to free themselves from Forests."
David Stanley, an analyst for Deutsche Bank, said the deal was worth close to $11 a share.
"In order to complete the separation process they have had to, through this new entity Rubicon, commit about 26c a share to acquiring Fletcher Forests at 40c a share and to underwrite the issue at 25c a share, which you would have to say is pretty cheap.
"So that seems a small price to pay, particularly given that Forests' intrinsic price is more likely to be above that."
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