Billionaire Graeme Hart is focusing his energies on Carter Holt Harvey's troubled wood products business as he tries to reverse the forestry giant's fortunes, says corporate adviser Grant Samuel.
"The medium-density fibre board business continues to struggle and is receiving significant attention from Rank Group [Hart's private company]," Grant Samuel
says in a report assessing Hart's latest CHH takeover bid.
"There remains a compelling logic to rationalise the mills that are not cost competitive."
The report says Hart's offer of $2.75 a share for the 14.3 per cent of CHH he does not already own is fair. It assessed the fair value at $2.43 to $2.89 a share.
Last week, the independent directors recommended Hart's bid as they released an abridged version of a report by corporate valuation group Grant Samuel.
Grant Samuel has not changed the valuation on the wood products division, which in the year to December generated just under 30 per cent of trading profits.
The Grant Samuel report says CHH's head office, where job cuts have been made, is the only other part of the business Hart has attacked.
The pulp and paper forestry, packaging, and forestry divisions have been left largely intact.
It also notes that since Hart took control, the overall mix of business drivers for the pulp and paper business has improved a little. The packaging and forests business has improved also.
But the wood products business outlook has deteriorated as the local housing market has declined and as mixed signals have emerged from the housing market across the Tasman.
The $2.75 offer tops Hart's earlier bid of $2.50, which closed last month.
It also revises an earlier plan to pay the $2.75 only if Hart lifted his CHH interest from his present 85.7 per cent to 90 per cent within seven days of making the offer.
The bid values the remaining 14.3 per cent he does not own at $514 million.
This is just $46 million more than he was paying for the stake under the $2.50 a share offer he closed last month.
Hart wants full control to take CHH out of the public eye, giving him greater flexibility to restructure the forestry group.
