GPG offer gets big 'no' from Rubicon's side of the chasm

By PAUL PANCKHURST

Guinness Peat Group's partial takeover offer for Rubicon is well below the lowest valuation of the company by independent valuation firm Grant Samuel.

Independent directors of Rubicon yesterday advised shareholders to reject the 75c-a-share offer that would lift GPG's stake from 19.9 per cent to 52 per cent.

Rubicon is a 17.6 per cent shareholder in Fletcher Challenge Forests and at the centre of GPG's "vision" - yet to be revealed - for consolidating the New Zealand forestry industry.

The report from Michael Lorimer and John Mandeno, of Grant Samuel, said the GPG offer was unfair, as Rubicon was worth 98c to $1.28 a share.

The offer, and the reports knocking it, went to shareholders yesterday.

In Auckland, Rubicon director Luke Moriarty described the difference between offer and valuation as "not a gap but a chasm".

Speaking from Chicago, where he was on a business trip, GPG director Tony Gibbs defended the offer as "real, cash, and on the table".

GPG says the offer price is 15 per cent higher than Rubicon's share price before the corporate raider climbed aboard.

Within Rubicon, the offer is seen as mystifyingly low and doomed to failure.

When GPG announced a takeover bid on August 28, analysts saw 75c-a-share as tight-fisted.

That offer ran into trouble with the Takeovers Panel. This one is mark two.

The report to shareholders from the independent directors - Moriarty, Hugh Fletcher, Michael Andrews, William Hasler, Stephen Kasnet, John Villiger and Jouko Virta - says GPG's offer does not:

* Disclose its intentions for Rubicon's biotechnology assets, particularly Rubicon's stake in ArborGen.

* Give "any detail whatsoever" on GPG's plan to remake the forestry industry.

* Explain why GPG helped defeat the Central North Island Forest Partnership deal that would have increased Rubicon's net asset backing to $1.06 a share.

The directors said that in its discussions with Rubicon, GPG had expressed doubts about the value of Rubicon continuing to put money into ArborGen, a South Carolina forestry bio-engineering company.

Rubicon owns 31 per cent of ArborGen. The two other major shareholders are International Paper and United States pulp and paper company Mead-Westvaco.

The Grant Samuel report said Rubicon's stake in ArborGen was worth $49.4 million to $98.8 million - or 18c to 35c per Rubicon share.

The three major AborGen shareholders had agreed to each put US$4 million a year into the company for five years. The arrangement had two and a half years to run.

The directors said not meeting that commitment could result in Rubicon forfeiting its ArborGen investment and ownership stake.

They believed that an indication of GPG's intentions for the biotech assets "would have been of benefit to shareholders".

Asked if GPG would sell the biotech side of Rubicon, Gibbs said it was "a distinct possibility".

He said the assets were like "a bucket with a hole in it".

"I would like to see profits coming out, not money going in."

Another issue raised in the Grant Samuel report is whether Rubicon's 17.6 stake in Fletcher Forests would be enough for GPG to make the changes it says it wants in the forestry industry.

Gibbs' response: give GPG a seat at the Fletcher Forests boardroom table "and we will start to make things happen".

The offer is open until October 24 and is for 40 per cent of the outstanding shares in Rubicon.

The Grant Samuel report put Rubicon's asset backing at about 82c a share.