Evergreen little company with big forest plans

By PAM GRAHAM

Evergreen Forests' participation in the Kiwi Forest Group's bid for the Fletcher Challenge Forest estate is about gaining scale and getting noticed.

"I'd better have a look at them," Tony Gibbs of Guinness Peat Group said yesterday. He was not alone.

Analysts are struggling to value the Kiwi Forest Group's plan until they know more about the Evergreen share component but say it has created competition for the forests and that pushed the Fletcher Forests' share price up.

The idea is to pay $750 million - $550 million in cash and $200 million of new Evergreen shares - to Fletcher Forests and split the purchased assets between Evergreen, a group of property developers and a US timber investment company.

Fletcher Forests would pass the Evergreen shares to its shareholders, giving them a stake in a bulked-up NZ forest-owning company.

Evergreen's own board has some evaluating of its own to do. Evergreen said yesterday that its participation in the Kiwi Forest Group remained subject to approval of its own board and shareholders and the transaction itself was subject to negotiation.

Evergreen has 151 million ordinary shares and had a market value of only $68 million before the plan emerged. Its forest assets are worth $190 million.

"We have consistently said we could double our size and manage that from our existing base," said chief executive Mark Bogle.

The company has 21,000ha of forests compared with Fletcher Forests' 106,000ha. It outsources most of the forest management.

The company aims to have debt with a long-term maturity to match the asset base, providing flexibility to respond to market conditions.

"We like to respond to the cycles by harvesting more when prices are higher than average and less when they are lower than average, which is now," said Bogle.

Evergreen was a New Zealand company, he said. "We have 2000 mainly New Zealand shareholders, we have four New Zealand-based directors out of six and we have a New Zealand-based management team."

The biggest shareholders are foreign, starting with the Ohio Public Employees Retirement System with 39 per cent, followed by a Danish pension fund for engineers, a Danish pension fund for teachers, Hambrecht & Quist, an affiliate of JP Morgan and the California-based Douglas family.

New Zealand shareholders include the Le Grouw family, Michael Friedlander and Don Brash, the National Party finance spokesman.

The size of shareholdings vary depending on whether the impact of convertible debt issues is included. Taking that into account, the Opers stake falls to 33 per cent and the Danish engineers have 10 per cent. That would all change in a bigger register if the deal went ahead.

Evergreen listed in 1993 with an initial estate of 1100ha.

It bought 3300ha of forests in South Auckland from Fletcher Challenge in 1997 and 3000ha of forests in Gisborne and Hawkes Bay from Carter Holt Harvey in 1999.

The company is too small to be in market indexes and its shares lack liquidity. Bulking up would put it on the radar screen of local institutions.