Maori leaseholders haunt Tenon amid takeover bid

Duncan Bridgeman

Saturday 17th April 2004

Maori lease-holders are threatening to turn Rubicon's $156 million bid for control of Tenon into a fiasco by haggling over the transfer of about $80 million of leases to Kiwi Forests Group.

Sources close to Tenon said any delay in the negotiations could shave up to 28c off the former Fletcher Challenge Forest's proposed $1.15-a-share capital return to shareholders.

Tenon must talk to about 100 separate Maori interests scattered throughout the Tarawera forest estate, a difficult process likely to be long running and expensive.

The issue is unlikely to derail the Tarawera sale but if the lease negotiations falter the properties concerned will remain in Tenon's hands, or possibly Rubicon's if its partial takeover is successful.

The lessees are in a powerful position, knowing that Tenon shareholders want their cash return and the company itself wants a clean sale.

Tenon has entered into an agreement to sell its Tarawera forests to Kiwi Group and US timber investor Hancock for $165 million, but the capital return to shareholders is dependent on the transfer of forestry rights and leases.

Tenon chairman Sir Dryden Spring was given a stern reminder of the issue this week when Rubicon complained the company had indicated to its shareholders the sale was unconditional.

Chief executive John Dell said yesterday he still expected few cases where transfer consents would not be granted and he remained confident the Tarawera sale would go through.

"We need to get alongside all the parties, explain what's going on, give them the documentation," Dell said. "But we are comfortable with the process."

There is a question mark over Tenon's ability to finance any shortfall in payout to its shareholders if a significant portion of the transfers remains unsettled by August.

"We haven't looked at that because we do remain confident that we'll get it all," Dell said.

"But certainly we have some flexibility in our banking arrangements ... the company is reasonably lowly geared."

The issue lurks beneath heated disputes over Rubicon's $1.85-a-share cash offer for 50.1% of Tenon and different valuations of the company.

Tenon says a profit upgrade, issued just hours before the proposed takeover announcement, has lifted its valuation of the company's shares to $2.06-2.32.

Tony Gibbs, a director of Guinness Peat Group, which owns 19.9% of Rubicon, said that range was "ludicrous" because it included foreign exchange gains of $7 million in the multiple calculations.

"I'm sure that whatever [Sir Dryden] did he did it in good faith but I just think the whole basis of putting multiples on foreign exchange gains is bloody stupid."

Dell said he did not accept the hedging gains should be taken out because the figure reflected the fact that operating earnings would have been higher had the exchange rate not been so high.

Gibbs: "That's nonsense accounting. You can't put a multiplier on the company and say that every year you are going to get a forex gain."

Gibbs said Rubicon had no plans to raise its bid and no other bidder had come forward.

Other major shareholders are expected to wait until the last minute before making a decision on whether to vote their shares.

Under the takeover code, the earliest date Rubicon can make a formal offer is April 22, after which the directors have 14 days to respond.

As far as the Tarawera sale is concerned and the transfer of forest rights and leases, Gibbs said he had no idea if there would be any delays. "Hopefully it will be okay, I very much hope it will."

For more on read Shoeshine http://www.sharechat.co.nz/features/nbr/article.php/62a3d080";>HERE

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