Cashed-up Carter Holt eyes $2bn forest

By PAULA OLIVER

Carter Holt Harvey yesterday gave its first hint of interest in buying the assets of the Central North Island Forestry Partnership when it applied for Commerce Commission approval.

Chief executive Chris Liddell said that although he had no immediate plans to buy the assets of the partnership, which was placed in receivership last month, seeking approval was a way of keeping Carter Holt's options open.

The forestry giant adopted a similar strategy when it applied for approval to buy the pulp part of the Tasman mill from Norske Skog, then followed through with the transaction.

Up for grabs are the assets of a partnership between Fletcher Challenge Forests and Chinese Government-owned Citic, which fell into receivership last month. It was hit hard by falling log prices after buying the vast estate from the Government for $2.2 billion in 1996.

Totalling 190,000ha of trees, and encompassing the Kaingaroa Forest, the assets represent a rare chance for an international company to buy a mature, sustainably managed forest.

Analysts expect fierce competition and have suggested the assets could fetch as much as $2 billion.

Both Fletcher Forests and Citic are expected to bid. While some in the market expected Carter Holt to show interest, many yesterday doubted it would complete the transaction on its own.

Carter Holt is cashed-up since selling its Chilean assets in late 1999 for $2.5 billion. Since then it has parted with around $1 billion for building a new laminated veneer lumber plant in Whangarei, buying Australian assets, taking a stake in a Chinese company, and buying part of the Tasman mill.

"I think they are interested, but I don't think they would necessarily go it alone," one analyst said. "I just don't see them spending $2 billion on the partnership."

Another analyst, who declined to be named, said the potential purchase appeared to fly in the face of the strategy Carter's parent company - International Paper - was following. IP is now divesting itself of its forest holding assets, he said.

But it did have the potential to aid Carter's strategy of controlling prices, by making sure there was a small number of estate owners who could supply.

"I would say they've only got around $500 million realistically left to spend of the Chile money, so they're likely to need a partner. But I would doubt if IP would want to be involved."

Arthur Lim, of JP Morgan, said there was some logic in the potential purchase.

"There are a lot of synergies and the like that can be extracted by somebody like Carter Holt Harvey, and now they have the Tasman mill they do have higher demand."

It would have been inconceivable for Carter Holt not to look at the purchase the first time it became available in 1996. Now, at a cheaper price, it had to be more attractive.

"I don't think they would want to spend a billion in a hurry, but from time to time assets like this come on to the market and you do have to take the opportunity as it comes through."