Fletcher deal seen as vote of confidence in industry

1.00pm


A $725 million deal to sell a huge chunk of central North Island forests is being hailed by local forestry leaders as a vote of confidence in the industry's future.

Fletcher Forests has confirmed it has struck a deal with a consortium of wealthy Auckland businessmen and overseas investment funds to sell its entire 106,000ha estate in the central North Island.

Most of the forests are in the Eastern Bay of Plenty, near Kawerau, and also near Taupo.

The sale is due to be completed by the end of February, provided it is approved by Fletchers' shareholders, and will affect more than 100 staff, including contractors.

Forest Industries Contractors Association president John Stulen said he was delighted by the deal.

Mr Stulen said there were positive signs, particularly with the Korean market, that the industry's fortunes were improving.

"Let's hope it defines the bottom of the cycle for our industry... The buyers have definitely done the deal at the right time."

Timber company P F Olsen's chief executive Peter Clark described the sale as further evidence of a growing trend of overseas pension funds taking an interest in forests -- a sure sign that they were perceived as a good investment.

Forest Research economist Louw Van Wyk described the deal as a shrewd purchase because it included freehold, rather than leased, land.

"I can't say what the future holds, but if there is a 5 per cent increase in global warming or some other major change then it could prove to be a very good long term investment."

About a third of the forests included in the deal are jointly owned with various Maori trusts.

One of the key Maori groups affected is Kawerau-based company Maori Investments, whose 5000 shareholders have a joint venture with Fletchers to run the Tarawera Forest.

The consortium has agreed to pay $165 million for the cutting rights to the Tarawera Forest.

The price does not include the land underneath the trees.

Earlier this year, the Waitangi Tribunal said the Crown should apologise and pay compensation to Maori Investments for failing to protect Maori interests when Maori land in the area was transferred into private hands in the 1960s.

The scheme involved the Tasman Pulp and Paper Company Ltd, the Crown, and several thousand Maori who contributed 15,385ha of land, including the mountain Putaukai (Mt Edgecumbe), in return for a stake in the joint venture.

Maori Investments says it would have preferred to lease the land rather than lose title to it. It also argues that iwi believed they were getting 14.8 per cent of the joint venture, but ended up with just 10.8 per cent.

Maori Investments chairwoman Bed Adlam said the company intended to contact as many shareholders as possible in the new year to consult them about the deal.

She confirmed the company was keen to retain the land in return for its share of the joint venture.

Meanwhile, another massive forestry deal that will see the Harvard University pension fund buy the rest of what was once Government-owned forests in the central North Island has been completed.

The deal, for an as- yet undisclosed sum, includes the massive Kaingaroa forest, the Kaingaroa Processing Plant, the Rotorua-based Timber Management Company and a half- share of an export joint venture.

The sale completes a trifecta of high-profile forestry purchases in the past week - the other being the Waipa Mill in Rotorua.

If successful, all three sales will be the end of an era for Fletcher Challenge, which along with Carter Holt Harvey, has been one of the country's biggest forestry investors.

- DAILY POST (ROTORUA)