4.40pm
Fletcher Challenge Forests (FCF) has paid $8.5 million to American company The Campbell Group so it can negotiate with a New Zealand consortium over the sale of its forest estate.
The payment was a variation to the exclusivity clause agreed by FCF and Campbell in a letter of intent in September.
In
the letter, Campbell offered $685 million in cash for the 106,000ha estate. The letter said FCF could be liable for a $17 million break fee for negotiating with other parties.
Today, FCF told New Zealand Exchange it had negotiated a variation to the letter of intent with Campbell.
FCF could immediately enter negotiations with Kiwi Forest Group (KFG), which offered $725 million cash for the estate.
Under the variation FCF would be liable for a further $8.5 million payment to Campbell if it reached an unconditional sale agreement with KFG.
The two payments of $8.5 million represented the break fee, which is capped at $17 million.
However, if Campbell was the successful bidder it would refund the $8.5 million already paid to FCF.
FCF joint chief executive John Dell said the variation to the letter of intent represented a "good" outcome for FCF.
"If the Kiwi Forests Group offer is successful, the $725 million sale price more than compensates the company for the full break fee," Mr Dell said in a statement.
KFG's bid is $23 million higher than Campbell's, if a $17 million break fee is factored in.
"On the other hand, if The Campbell Group is successful, the company will not have incurred any additional cost," he said.
Both the Campbell and KFG offers are subject to a number of conditions, including due diligence and the supply of wood.
"The board will be seeking to ensure that all substantial conditionality is removed from any offer before it makes a final recommendation to shareholders," Mr Dell said.
KFG director Ross Green said the group welcomed the news.
"We appreciate that the Fletcher board has now put itself in a potion to deal constructively with our offer," Mr Green said in a statement.
"We believe we have a good understanding of the issues that are important to the company and are confident that the parties will be able to quickly progress the negotiations to a satisfactory conclusion," he said.
At 4.30pm, FCF shares were up one cent at $1.30.
- NZPA
