Citic picked to wrap up forest assets

By PAM GRAHAM And PAUL PANCKHURST

Chinese investment company Citic is close to a deal to buy the assets of Central North Island Partnership on its own, as a result of the joint purchase proposed with Fletcher Forests falling over in August.

The plan is for South East Asia Wood Industries, Citic's Hong Kong-listed associate, to buy the forests for US$650 million ($1357 million). Fletcher Forests would be retained as manager provided its board remained unchanged.

The forests' receiver Michael Stiassny was briefed on the latest proposal about four weeks ago.

Banking sources said yesterday that Citic had secured the support of 11 of the 12 banks involved in the original Fletcher deal.

HSBC, Citic's house banker in Hong Kong, has not agreed and is being lobbied for support, the sources said.

HSBC contributed US$100 million to the funding of the previous plan so its support is important. If this is not forthcoming the other banks, which are frustrated by HSBC, may have to contribute more. Seawi is expected to have to put in about US$200 million of equity.

If HSBC comes on board, the transaction will proceed quickly because it does not need shareholder approval. Government and foreign investment approvals are not expected to be a problem.

The decision on who will manage the forests is not final and will change if control of Fletcher Forests changed. Citic has high regard for Fletcher Forests' chief executive Terry McFadgen and chairman Sir Dryden Spring.

Corporate raider Guinness Peat Group, which helped scupper the Citic/Fletcher deal, has made a partial takeover bid for Fletcher Forests' major shareholder Rubicon.

Stiassny said yesterday nothing had changed from his previous statements and he wasn't in any current talks. Citic NZ's deputy managing director Charlie Tian declined to comment.

"Things are happening slowly at the moment because of a jam with HSBC," a source said, adding any announcement could be two to three weeks away.

Paul Gillard, Fletcher Forests' company secretary, said: "We remain interested as we have always said. That's about as much as we would like to say at the moment.

"Obviously we put a lot of effort into the transaction last time and I'd just like to leave it at that."

Bankers typically give transactions code names and this one has been going on for so long it has had about six names, a source said.

Stiassny dubbed it Project Christmas last year because he wanted to get the deal done by Christmas. It's now called Project Cone after the humble pine cone.