Hart offer for CHH 'not fair'

Graeme Hart

Graeme Hart got a bargain when he got control of Carter Holt Harvey, the company's independent directors said yesterday.

They told shareholders in a letter that the billionaire's bid for the outstanding CHH shares undervalued the company and should be rejected. Hart, who is making a $3.3 billion bid for 100 per cent of the forest products company, already has an agreement to buy a controlling 50.5 per cent stake from US company International Paper.

He is now making an on-market bid of $2.50 a share - the same price he paid IP - for the remainder.

CHH's independent directors have released a target company statement, backed by a Grant Samuel assessment, valuing the company at between $2.55 and $2.95 a share. The mid-point valuation is $2.75 a share.

In the letter to shareholders, the directors conclude the offer is "not fair" as it is 9.1 per cent less than the mid-point valuation.

The directors were also critical of the speed with which IP sold its majority stake to Hart.

"A less constrained process could have been more strongly contested and produced a higher offer," the letter said.

Financial advisers Cameron & Co also examined CHH and reviewed the Grant Samuel report. Their advice to the directors was "generally" in agreement with the Grant Samuel report.

They also noted that there were significant opportunities to enhance the performance and value of the business.

Earlier in the day, Hart's Rank Group sent its formal takeover offer to shareholders - allaying any market fears that the billionaire might reconsider his bid in the wake of CHH's profit downgrade last week.

On Monday, the company said profit could fall $30 million short of its $283 million July forecast, which prompted fears that Hart might use a material adverse change clause to renegotiate his offer.

But analysts had a hunch Hart liked his price and was unlikely to risk the majority stake he already had locked down.

In a short letter to shareholders, Hart described his $2.50 bid as "attractive"and as offering a significant premium to CHH's historical share price. He noted that its shares had closed above $2.50 on only 2 per cent of trading days in the past five years.

While many in the market have been sceptical about how serious Hart's bid for full control is, he has advised the independent directors he will not be increasing the offer.

While many CHH shareholders would concede that $2.50 is an appealing price, most may prefer to go with Hart.

The offer is to close on October 13.