GPG bid targets Rubicon

By ELLEN READ and PAUL PANCKHURST

Guinness Peat Group yesterday launched a $67 million partial takeover bid for forestry investor Rubicon as it plots a new direction for New Zealand forestry.

But the reputedly tight-fisted corporate raider may face an uphill battle as analysts quickly judged its 75c a share offer was too low to succeed.

GPG director Tony Gibbs yesterday revealed a bid to lift GPG's 19.9 per cent stake in Rubicon, the biggest shareholder in Fletcher Challenge Forests, to 51.9 per cent.

That would involve buying 40 per cent of the Rubicon shares GPG did not already hold. The company also said it would be content with a stake between 30 and 50 per cent if it did not reach the 51 per cent mark.

However, analysts said the offer of 75c a share was low, citing Rubicon's higher asset backing and its strategic importance for GPG.

"It's a little on the light side," said First NZ Capital analyst Andrew Mortimer.

"People are going to say it's pretty mean," said ASB Securities' head of advisory, Stephen Wright.

Gibbs said the offer price was not too low and disputed analysts' views that the company had an asset backing of 80c.

Asked whether he would consider changing the terms of the offer, Gibbs said: "As far as I'm concerned, the offer is the offer and that's that."

He noted that even a holding of between 30 and 50 per cent would give GPG enough influence over Rubicon to in turn influence Fletcher Forests.

But a stake within that band would require shareholder approval.

The second largest block of shares after that of GPG is the nearly 16 per cent held by the New York-based Perry Corporation, but those shares are locked up by a court injunction after GPG this month accused Perry of disguising the extent of its holding. A date has yet to be set for the court hearing that could free them up.

The third largest shareholder is AMP Henderson, with 11.3 per cent.

The fund manager's chief investment officer, Chris Wozniak, cast doubt on whether the AMP would sell at 75c when he noted yesterday that most of the "75c sellers" would have been mopped up when Rubicon secured its 19.9 per cent stake at the price in last month's late-night raid.

He said AMP would wait for the recommendation of Rubicon's independent directors before deciding whether to sell.

Gibbs said the bid was important for GPG's vision to promote consolidation and co-operation within the forestry industry - but wouldn't elaborate on exactly what that meant.

Rubicon's shares were at 69c when the Stock Exchange halted trade late yesterday afternoon pending the announcement of the bid.

GPG has between 14 and 30 days to formally present the offer to Rubicon shareholders.

Rubicon's independent directors will make a recommendation within the 30 days.

First NZ's Mortimer said it was hard to see an outcome for Rubicon below 80c.

He doubted shareholders would approve the holding of a stake of 30 per cent to 50 per cent, saying that would effectively give GPG control of the company without having had to pay a premium.

Forsyth Barr head of research Rob Mercer saw few reasons for shareholders to reject GPG holding 30 per cent to 50 per cent.

"The game plan centres around Fletcher Forests and if they [GPG] can do something positive on Fletcher Forests then Rubicon shareholders will benefit from that," he said.

Macquarie Equities senior investment analyst Arthur Lim said analysts valued Fletcher Forests shares at 34c, compared to their closing price yesterday of 23c. In that light, Rubicon's Fletcher Forests stake contributed to a net asset backing of $1 a share for Rubicon.