GPG's Rubicon ploys baffle

By PAUL PANCKHURST

As corporate raider Guinness Peat Group slowly tortures takeover target Rubicon and its chief executive, Luke Moriarty, the question starts to become: to what end?

The partial takeover bid closes on Friday and is widely seen as doomed to failure.

GPG has inched ahead from its 19.9 per cent level of shareholding.

The takeover bid runs alongside GPG's aggressive campaign against the company and its bosses.

As part of that campaign, GPG and its allies have been leaking to the media and complaining to market regulators, focusing on claims of undisclosed executive remuneration.

The next instalment in this saga will be claims surrounding a bonus payment to Moriarty.

While GPG director Tony Gibbs would not discuss the issue - he said he was restricted by his obligations as a director of Rubicon - the complaint has been made, and journalists have been steered in the right direction to find out the details.

Looking at the wider picture of GPG's possible moves, three scenarios are floated.

Number one: GPG could try to roll Moriarty and chairman Michael Andrews from the board at an extraordinary general meeting. This idea is floated by the GPG camp. The Rubicon camp believes GPG would not dare - it does not have the support.

Number two: Rubicon could buy GPG's stake to be rid of its tormentor - a move that would need to be sold to the other shareholders. Nat Vallabh, of shareholder AMP Henderson Global Investors, said he would not want Rubicon to pay more than GPG's entry price: 75c a share, or about $41.8 million.

Number three: GPG could try to lead a break-up and sale of the forestry and biotech company, whose assets include a 17.6 per cent stake in Fletcher Challenge Forests, a stake in biotech venture ArborGen, and $64 million in cash. Irrespective of GPG, cashing up the company was always a possibility, though Rubicon believes a fire sale would destroy value.

As part of the communications programme for GPG's 75c-a-share bid, the company's broker, JBWere, has contacted small shareholders of Rubicon, asking how they see the offer - but also testing support for GPG-led change in the company.

The broking firm is reported to have called 1200 shareholders.

The picture from GPG is - as you would expect - of a swell of support for it to lead change in the company.

But that may not make much difference to anything.

The big shareholders in the company - leaving aside GPG and its adversary the US-based Perry Corporation - are the institutions.

The two biggest institutional shareholders, AMP Henderson Global Investors (11.27 per cent) and Tower Asset Management (6.1 per cent), both indicate support for the Moriarty/Andrews regime.

Tower's Wayne Stechman said: "I don't think Rubicon have done anything wrong."

In fact, he said, the company had had a good deal lined up to sell the Fletcher Forests stake for 37c a share - the transaction shot down by campaigners, including GPG, in August.

Fletcher Forests shares closed on Friday at 22c.

On the topic of altering the board or management, AMP Henderson's Vallabh asked: "Why fix something if there is nothing wrong with it?"

While GPG's stated intention is to consolidate and rationalise the poorly performing forestry sector, neither of these two institutional investors has been briefed on a detailed plan, they say.

Asked if he had seen a detailed plan, Vallabh said: "None whatsoever. I don't believe they have one."

A concept maybe, but not a plan.

Critics argue GPG is finding it harder than expected to come up with a winning play. The idea of pulling together Maori interests looks like a big ask and GPG is yet to establish itself as having a credible plan.

That speculation helps to fuel talk of the raider hoping to find a way back out of Rubicon, but it is not a very liquid stock.

One wild-card in the mix: the outcome of GPG's legal action against the multibillion-dollar US hedge fund Perry Corporation.

GPG is accusing Perry, a 15.9 per cent shareholder in Rubicon, of misleading the New Zealand market by hiding its interest.

That court case starts on December 9 and is due to run for two weeks. A source close to the case said there were no signs that a settlement was likely. The harshest punishment would be Perry's forfeiture of its stake.

A second wild-card: exactly what facts and allegations come out in the court case to sway shareholder opinion on GPG and Rubicon.

Presumably a legal victory for GPG will also be a public relations coup.

In the run-up to the case, dealing with the mountains of detail in the legal process of discovery is yet another pressure on Rubicon executives.

Today, Gibbs and fellow GPG director Gary Weiss attend their first Rubicon board meeting.

A good guess is that Moriarty and Andrews regret the day the pair were invited to join. That was a tactical mistake.