Testy relationship ends with shares sold low

Corporate raider Guinness Peat Group has sold its cornerstone stake in forestry and biotech investment firm Rubicon, bringing to a close one of the more acrimonious chapters in New Zealand corporate history.

The sale of the 19.9 per cent stake at $1.03 per share values the holding at $58.4 million. That is well south of Friday's closing price of $1.12.

However, GPG director Tony Gibbs was philosophical, saying GPG made a profit of $16 million to $18 million on its investment.

"From a GPG point of view we've booked a modest profit, and we're closing the file and moving on," Gibbs said. "It's time to get out. We've been there and done it, and it's time to move on."

Rubicon shares closed down 7c at $1.05. Shares of Tenon, Rubicon's main investment, dipped 1c to $4.42, while GPG rose 1c to $2.12.

GPG has a colourful history with Rubicon.

In 2002 it played a major role in blocking a bid by Fletcher Challenge Forests to buy the Central North Island Forestry Partnership. At the time Rubicon held a cornerstone stake in Fletcher Forests, now renamed Tenon.

GPG also took fellow Rubicon shareholder Perry Corp to court in an acrimonious and prolonged legal battle in which it alleged Perry, a multibillion-dollar US-based hedge fund, concealed the size of its stake.

But GPG supported Rubicon's bid for 50.01 per cent of Tenon and its later reorganisation to focus on wood processing and marketing.

Gibbs was chairman of Tenon and sat on the Rubicon board but resigned from the posts yesterday.

Reasons for the disposal are not clear. Sources have suggested GPG wished to merge Tenon and Rubicon, saving on head office and listing costs. But its ambition was thwarted by board disagreements over the value of Rubicon's key biotech asset Arborgen.

They also said the Rubicon board wanted to leave the option of a sale of Tenon open and believed such a deal would be easier if it had its own sharemarket listing.

Others argue that GPG is clearing the decks for another transaction.

"You wonder if it has got some precursor to something happening with Tenon as well," ASB Securities managing director Tim Preston said. "(The deal) is obviously part of a bigger picture."

GPG, the investment vehicle of Sir Ron Brierley, is amassing an impressive cash fund. It recently sold several British businesses, including hotel group De Vere, for a combined 50 million ($130 million).

"Apart from their Coats (UK textile company) holding I think their next biggest holding is cash now, so the market is certainly going to be interested to see what they are going to do with that cash," Hamilton Hindin Greene broker James Smalley said.

Walker Capital Management's Steve Walker said the disposal would allow Rubicon to pursue its own agenda.

"I am pleased to see Rubicon freed up," he said.

Gibbs said that the sale proceeds would be absorbed into GPG's coffers and that the company had no plans for the money.

"In the totality of GPG it's not a huge amount of money, but it's still significant."

The identity of the bidders for GPG's stake are not known. The lack of substantial security holder notices filed to the stock exchange suggests an offshore buyer.

Rubicon chief executive Luke Moriarty said he was as in the dark about the buyers' identities as anyone.

"We have to wait and see who's on the other side of the placement of those shares before commenting," he said.

GPG's exit leaves Perry Corp as Rubicon's cornerstone shareholder, with a 19.8 per cent stake. Insurer AMP and US investment fund Third Avenue both own 10 per cent. AMP has previously indicated it was interested in building its stake.