Firm could be valued at $1b but some fund managers wary after Goodman Fielder.
The Carter Holt Harvey sharemarket float is expected to receive a wary reception from some institutional investors, with one market source saying they may not invest at all.
But a sharebroker said the planned initial public offering, first tipped by the Business Herald last month, could generate solid demand provided it is sensibly priced.
Rank Group, the investment vehicle of New Zealand billionaire Graeme Hart, ended weeks of market speculation yesterday when it confirmed it is considering an IPO and transtasman sharemarket listing of the Auckland-based building products firm.
Rank said it expected to retain a significant stake in Carter Holt following the IPO, which is being jointly managed by investment banks Credit Suisse, First NZ Capital, Deutsche Bank, Deutsche Craigs and Forsyth Barr.
Media reports last month suggested about 70 per cent of the company, which operates Woodproducts New Zealand and Woodproducts Australia, plus roughly 50 Carters building supplies stores in this country, would be sold through the deal.
The listing, expected to take place in early July following the registration of a prospectus in June, has been tipped to value the company at up to $1 billion and could be the biggest float New Zealand will see this year.
Carter Holt is Rank's last remaining Australasian-based business.
One source, who spoke on condition of anonymity, said fund managers would approach the offer cautiously, partly as a result of the investor experience that followed Hart's 2005 float of Australasian food giant Goodman Fielder.
"From an investment point of view [Goodman Fielder] was just a disaster," he said. "Investors, with the Goodman Fielder experience in the background, will be very, very wary."
Goodman Fielder shares performed relatively well in the two years following the IPO, during which time Rank held on to a 20 per cent stake in the food firm.
The stock, which was issued in the IPO at A$2 a share, had a trading range of A$1.92 to A$2.63 through that period.
Those arguing in Rank's favour say external factors, such as increasing commodity prices, drove the downturn in share price performance that took place after the billionaire sold his remaining Goodman Fielder stake in late 2007.
The source said his firm would be particularly cautious of any financial figures in Carter Holt IPO's documentation "to the point where it makes it almost uninvestable for us".
He also said Rank Group had a reputation for aggressively stripping out costs from its businesses before a sale, while Carter Holt was viewed as having limited growth prospects.
Carter Holt's bankers are understood to have begun making presentations to fund managers on both sides of the Tasman.
Eventually it will come down to pricing at the end of the day. Mr Hart did not become the wealthiest man in New Zealand by selling assets cheaply.
Another source said some market players had a "jaundiced view" of the company. "There's going to have to be some re-education required to show that this is a business that should be listed."
A third market source said investors should wait to see the offer documents - and the quality of the firm's yet to be announced board - before jumping to conclusions about the IPO.
Grant Williamson, of sharebrokers Hamilton Hindin Greene, said the market remained "hungry for quality IPOs".
"Eventually it will come down to pricing at the end of the day," Williamson said. "Mr Hart did not become the wealthiest man in New Zealand by selling assets cheaply."
Williamson said the building supplies sector was out of favour with some investors given Fletcher Building had underperformed the market for some time.
"But a business in any sector can be attractive, provided it's well managed," he said.
Carter Holt, which de-listed from the NZX and ASX after Rank's $3.3 billion buy-out in 2006, was a serial sharemarket underperformer during its final years as a listed company.
Much of the marketing ahead of the float will be aimed at convincing investors that the Carter Holt of today is a very different company to the publicly listed firm of a decade ago.
Carter Holt has been significantly slimmed down under Hart's ownership and sources have said part of the sell behind the IPO is it's a much simpler business than Fletcher Building.
Divestments since 2006 include Carter Holt's substantial forestry estate, dairy farms and other property. Its pulp, paper and packaging businesses were sold to Japan's Oji Holdings and Innovation Network for about $1 billion last year.
Today, the firm is understood to have fewer than 5000 staff and revenue of about A$2 billion. Reasonable dividends are expected to be touted to prospective investors.
Hart's wealth was recently estimated at US$7 billion by Forbes.
Big listing
• Tipped to value Carter Holt Harvey at up to $1 billion.
