Evergreen loss highlights Opio

By Chris Hutching

Friday 3rd September 2004

Evergreen Forests' full year loss of $12 million, reported this week, may help shareholders in the Opio Forest Fund crystallise their thoughts about the industry and the value of a City Forests takeover offer that was due to close today but has been extended to October 8.

Although an independent appraisal report claims the fair value of Opio shares is 93.4c a share, it also says the City Forests bid is an opportunity for investors to quit the investment and Opio directors have recommended shareholders take the 85c a share offer, which they say represents a price that may otherwise be hard to achieve. Most Opio shareholders appear to be sitting tight with an eye on the long term. City Forests had received just 8.6% acceptances mid week and the units were trading below the bid price at 79c.

Opio shareholders might also consider the motivation of City Forests, a company 100% owned by Dunedin City Council, which has recently been active in promoting controversial economic development projects in its region, raising questions from would-be mayoral candidates about the wisdom of the city's expansive investment and consequent debt programme.

For Opio shareholders the ambition of Dunedin City councillors to become major forestry owners in a weak market may be a fortuitous alignment of interests (but not necessarily for Dunedin ratepayers). The 85c offer price is nearly twice the level the shares have traded at over the past four years.

The Opio fund owns 1360ha of the mainly radiata forests in Otago and Southland that City Forests believes will reap dividends.

Meanwhile, Evergreen Forests chairman Peter Wilson, commenting on that company's $12 million loss, said that with the company's restructure completed and non-core asset sales under consideration, the board was actively addressing future options.

Wilson said the result reflected the reality of the export market for logs showing poor returns, due in part to continuing high shipping costs and the strength of the New Zealand currency.

He also noted there had been significant transactions of forest-land over the last year and said more were to come in a shakedown of the industry.

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