By GEOFF SENESCALL
Final bids for Fletcher Energy are understood to have been placed yesterday as the restructuring of the Fletcher group enters its final stage.
The company remained silent, refusing to confirm either the bids by number or that the process had closed. Speculation centres on Royal Dutch Shell, Chevron, Enron, BP-Amoco, Unocal and Apache Energy, who are all believed to have done due diligence on Fletcher Energy.
Morgan Stanley, the merchant bank brought in from Sydney as advisers, will have to put recommendations to the Fletcher Challenge board, which has the ultimate say.
Fletcher Challenge spokesman Clive Litt said last night that all options were being looked at and measured against the standalone base case.
"I am not going to speculate on outcomes."
The market has been abuzz with rumours of an imminent sale of the energy division. Last week its share price soared to 801c on talk that Royal Dutch Shell was going to offer $10.05 a share comprising 120c for Fletcher Energy's investment in Capstone Turbine, a 35c special dividend and 850c for each energy share.
The company quickly dampened speculation after a Stock Exchange query on the share price movement by saying nothing was about to happen. But the market is mindful the announcement of the Fletcher Paper sale in April came three days after final bids were in.
The problem in Fletcher Energy's case is that it is the most profitable division. It is unlikely Fletcher Challenge will make a decision on the energy division before its sorts out the rest of the group, which includes building and forests divisions.
The key here is Fletcher Forests, which sits on net debt of around $1.7 billion (consolidating its investment in the Central North Island Forestry Partnership) when it has equity of just $1.2 billion.
If Fletcher Forests is not sold its balance sheet must be recapitalised if it is to stand alone, either through bringing in a new shareholder or selling assets. Merrill Lynch is handling this process, also in its final stages.
Given these complexities Fletcher Challenge may opt to nominate a preferred bidder for Fletcher Energy to counter market speculation and hype during the last stages of restructuring. Analyst valuations of Fletcher Energy are between 850c and 900c. This does not include Capstone, which is trading at $US50 a share, making Fletcher Energy's stake worth $900 million or 260c a share.
But it is likely bidders for Fletcher Energy will discount Capstone given that it cannot be sold before December and is not a core business. Another option would be to separate Capstone and distribute shares to existing Fletcher Energy holders.
Fletcher rejig into last stage
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