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Rubicon will rule on major Forests stake

Friday 15th December 2000

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By Nick Stride

One of the first tasks awaiting Rubicon when it is created next year will be to decide the fate of a major stake in Fletcher Forests.

The division's rights issue last week left a shortfall of $167.5 million, or 670 million new shares, in the hands of its underwriters, principally Credit Suisse First Boston. Those shares represent a 24% stake in the recapitalised company.

Sharebrokers say a stake of that size is likely to be attractive to some or all of the trade buyers who ran the rule over Forests earlier this year. They also believe CSFB already has a buyer.

CSFB could not be reached for comment.

The new shares will be allotted tomorrow.

At the time prospective buyers were looking the division over, the shares were trading at 80c and above. Chairman Rod Deane has said none of the parties put forward an offer that met directors' view of the company's value.

He said some had been put off by Forests' legal wrangle with its Central North Island Forests partner, Citic.

CSFB doesn't have complete discretion over its Forests stake. An agreement with Rubicon, the company to be created initially to assist Forests' recapitalisation, over 40% of the shortfall is both a put and a call option.

That means CSFB can put 266 million shares (9.5%) to Rubicon. Rubicon can also call the shares from CSFB.

If either of those options is exercised Rubicon will be Forests' biggest shareholder, with 17.7%, while CSFB's stake will be reduced to 14.4%.

Until Rubicon is created Fletcher Challenge may exercise its legal rights.

A further agreement stipulates Fletcher Building must, at Rubicon's election, take the first $20 million worth of shares put to Rubicon by CSFB. The remainder will be split four-for-one between Rubicon and Building, leaving Building with 117 million shares (4.3%) and Rubicon with 374 million shares (13.4%).

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