Stories of a billion dollar buy-up of New Zealand currency sent brokers into a spin yesterday - and left them wondering if a takeover attempt might be made for one of the country's largest companies.
Market sources, say broking firm Merrill Lynch has picked up more than $1.2billion in Kiwi currency over the past week, possibly using United States dollars.
The move was seen by rival brokers as either a major punt on the local currency, or preparation to go shopping in New Zealand.
"The last time we saw a big foreign exchange deal like this it came just before Norske Skog moved on Fletcher Paper," one analyst said.
"It could be someone taking a punt, but it's a fairly major punt."
Several brokers yesterday suggested Fletcher Challenge Forests as a possible takeover target. Timber industry players have suggested that Chinese government-owned Citic might try to buy its former partner Fletcher Forests.
Merrill Lynch jointly handled Citic's recent bond issue.
Citic has expressed interest in buying the assets of the failed Central North Island Forestry Partnership, but buying Forests itself has always been seen by some as a better option.
"It would be a cleaner transaction than getting tied up in what has been a slow-moving receivership process, and could possibly become a bidding competition," a broker said.
"It would eliminate the court case the two are fighting, and would surely put Citic in the box seat to buy the Central North Island Partnership."
Forests' share price has been languishing at around 30c. If the New Zealand currency deal was aimed at the company, it would suggest an offer of around 45c a share.
Forests' shares were heavily traded yesterday, and 35 million changed hands.
But suggestions of a major corporate deal were pure speculation, others said. It could simply be that Merrill Lynch was making a currency play in this part of the world.
"It could just be a simple deal, but it's certainly got us racking our brains to figure it out," a broker said.
"We don't see any other top ten companies as likely targets - although Contact Energy and Carter Holt are always mentioned at times like this."
