Norske moves into line for FCL Paper

By GEOFF SENESCALL

Norwegian newsprint giant Norske Skog is tipped to be one player lining up to take on Fletcher Paper.

In the wake of Fletcher's aborted $C3.6 billion merger with its Canadian subsidiary, the Norske chief executive Jan Reinaas is reported to have said the company was looking to buy or merge with a similar-sized newsprint company.

According to analysts both companies have roughly the same capacity. The fact that Norske is flagging it is a buyer of newsprint assets at this time is seen as more than coincidental.

"We must make a move or position ourselves or we haven't done our homework properly," Mr Reinaas was reported to have said.

Norske's statement follows comments by the Fletcher chief executive Michael Andrews at last Thursday's annual meeting that it was still looking to exit Fletcher Paper - the linchpin in the restructure of the Fletcher Challenge group.

One possibility was to merge the paper asset with another party, he said, adding that Fletcher Paper shareholders invested in the company because they liked the asset.

While Mr Andrews was coy about any sale process, it is understood there have been approaches made.

Analysts say Norske is well positioned to do a deal with Fletcher Paper. Last month Norske sold off a big part of its non-newsprint assets by exiting its lumber business, giving it a very strong balance sheet.

One analyst, who declined to be named, believed that Norske would be keen in doing a deal somewhere between Fletcher Paper's current price of 127c and the 179c a share it was valued at in the merger deal with Fletcher Canada.

Its main interest would be in Fletcher Paper's Australasian and South American assets.

While there would be little appetite for Fletcher's 50.8 per cent stake in Fletcher Canada, it was currently cheap enough for Norske to stomach, the analyst said.

However, any deal with Norske would not be done until Fletcher Canada's balance sheet was recapitalised and the $C700 million in cash sitting on its books was distributed.

The analyst also noted that Norske owned shares in the Asian newsprint group Papco, which controls 40 per cent of the capacity in that region excluding Japan. One of the shareholders in this partnership was Abitibi Consolidated, the largest newsprint company in the world, which could be interested in the Canadian asset, the analyst said.