UPDATE: Rank Group confirms plan to sell down Carter Holt stake in IPO

Tuesday 12th May 2015

Rank Group, owned by billionaire Graeme Hart, confirmed plans to sell down its stake in building products supplier Carter Holt Harvey in an initial public offering and list the shares on the New Zealand and Australian stock exchanges.

Auckland based Rank Group plans to retain a significant stake in the company, it said in a statement, without providing further details. Media reports last month suggested Rank would sell 70 percent of the business.

Rank paid $3.31 billion for Carter Holt in 2006, and has since sold off the company's forestry and farm land and its pulp and paper unit, leaving a smaller business focused on wood products and building supplies. An initial public offering slated for the middle of the year, which will reportedly value the company at $1 billion, is set to be the biggest in New Zealand this year.

"There would be pretty good demand for it," said Daniel Metcalfe, senior client adviser at OMF. "It's a very tangible business, with a strong New Zealand history and there hasn't been an issue of this size for quite some time so people will be keen to diversify their portfolios and expand the New Zealand share ownership."

Professional investment funds will probably also buy the stock because of the large size of the company, he said.

Carter Holt competes with publicly listed Fletcher Building in the building products distribution market with their respective Carters Building Supplies and Placemakers outlets, and both manufacture building products on both sides of the Tasman. Carter has about 50 building supply stores in New Zealand to Fletcher's 58 Placemakers outlets. They also compete with Bunnings, Mitre 10 and ITM.

Government figures published last month showed New Zealand building consents, a measure of demand for building supplies, rose 12 percent to 25,038, in the year through March, with new house permits rising 3 percent to 18,012.

Carter Holt's other two divisions are Woodproducts New Zealand and Woodproducts Australia. According to information published in The Australian, it is the market leader in Australasia for timber, engineered wood products and structural plywood. It is ranked first in Australia for MDF, particle board and flooring and second in those products in New Zealand to Fletcher.

Metcalfe noted the building supplies market is "increasingly competitive".

Carter Holt doesn't publish details of its financial performance and investors said it would be difficult to value the company until the prospectus was made public. Media reports speculated the company had revenue of about $2 billion and would likely offer "reasonable dividends" to lure investors.

Hart, New Zealand's richest man, specialises in buying, then restructuring businesses and reselling them.

Metcalfe estimates Rank Group has sold around $3.1 billion of Carter Holt assets, close to the price of Hart's original investment, but he may have been forced to hold the asset for longer than he wanted because of weak conditions during the global financial crisis.

"He's clearly going to make a decent profit out of it," Metcalfe said.

Hart has been looking across all of his portfolio of investments with a view to selling down assets, including a strategic review by his Reynolds Group Holdings of its Evergreen, Closures and SIG units last year.

The joint lead managers for the Carter Holt offer are Credit Suisse, First NZ Capital, Deutsche Bank, Deutsche Craigs, and Forsyth Barr.

BusinessDesk.co.nz

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