Carter Holt Harvey

New Zealand billionaire Graeme Hart is hatching a deal for his Carter Holt Harvey cardboard box business to join forces with its counterpart at Amcor, in a play aimed at challenging the dominance of Richard Pratt's Visy.

Mr Hart has been been in talks with Amcor for two months to form a joint venture between the separate corrugated and paper businesses of his forest products company and the Australian packaging giant. A combined operation would have revenue of about $A1 billion a year. Amcor has run a knife through the hierarchy of its cardboard box business over the past few weeks, making redundant at least three senior executives including its boss, Darryl Roberts. The Victoria-Tasmania general manager, Andrew Harris, and another senior executive, Walter Gross, departed almost immediately last month.

A former Amcor executive said the latest redundancies were aimed at lowering costs to a level that would eventually determine the shareholdings of both Amcor and Carter Holt in the joint venture. "Hart looks like he is going to take management control of it," the executive said.

The deal, expected within months, will raise concerns about a duopoly in Australia's $A2.2 billion cardboard box market, which is still reeling from the record $A36 million fine imposed on Mr Pratt and Visy for a price-fixing cartel with Amcor. The former Amcor executive claims the Australian Competition and Consumer Commission has given tentative approval to an Amcor-Carter Holt joint venture.

Mr Hart has gone on a spending spree since taking full control of Carter Holt early last year for $NZ3.3 billion, buying Swiss packaging giant SIG, Blue Ridge Paper Products of the US and beverage packaging assets from International Paper. But New Zealand's richest man will still have an estimated $A2.5 billion-plus to spend after selling a 20 per cent stake in Goodman Fielder in October and from a yet-to-be completed auction of Carter Holt's timber products business.

"They may be looking at it," another Amcor executive said late last week of Mr Hart's intentions for Amcor. "There's a rumour about Carter Holt Harvey every week - Graeme Hart has run the ruler over Amcor." Amcor executives will brief investors in Sydney on Tuesday next week about the overall business.

A New Zealander, Greg Beatty, the former boss of Fonterra Australasia, took over as Amcor Australasia's managing director in October from Louis Lachal, a 27-year veteran of the company who will retire next year. Also departing Amcor Australasia are Melanie Huson, the human resources chief who leaves next week, and another executive, Shay McQuade. Before Mr Hart took over Carter Holt, the company is understood to have offered the Amcor board about $A1.3 billion for its fibre packaging business about three years ago. Sources say Mr Hart has since made several approaches to Amcor for the business, to no avail.

Carter Holt is the third-largest cardboard box company in Australia behind Richard Pratt's Visy Packaging - which has about 47 per cent of the market - and Amcor (less than 40 per cent). Between them, the three control the cardboard box markets on both sides of the Tasman. Amcor's cardboard box businesses in Australia and New Zealand have struggled from a lack of investment.

Fletcher Building will not buy all the Carter Holt Harvey assets put on the block by billionaire Graeme Hart, but might acquire small parts of the businesses.  Speaking after yesterday's annual meeting in Auckland, Fletcher chief executive Jonathan Ling said the building materials manufacturer and distributor would not make any big acquisitions within the next three months.

Mr Hart is selling building product makers and marketers Wood Products New Zealand and Wood Products Australia, the Carters building materials chain, and furniture and joinery business Interion.  Fletcher Building. advised by investment bank Goldman Sachs JBWere, is understood to have looked at these businesses.  However, Carter Holt owner Rank wants to complete any sale, which analysts expect to be about $2 billion, by the end of the year.

Asked about the potential for big acquisitions, Mr Ling said: "There's nothing of any size in the pipeline at the moment."  Asked specifically about the Carter Holt asset sale, he declined to comment, citing confidentiality obligations.  It is understood Fletcher could buy small parts of the businesses, possibly as part of a consortium.  However, international private equity group CVC Capital Partners is believed to be the frontrunner to acquire the Carter Holt assets. 

Mr Ling said Fletcher's current focus was integrating July's US$700 million (NZ$929 million) acquisition of benchtop group Formica from private equity groups Cerberus Capital Management and Oaktree Capital Management.  Mr Ling said the planned closure of a Formica factory in California and the doubling of production at an Ohio factory were running behind schedule.

Fletcher will pay Cerberus and Oaktree a further US$50 million if this restructuring is finished by June 30. Mr Ling said delays would affect this payment but, citing confidentiality agreements, he declined to say how.

Formica's Asian and European operations, which comprise about two-thirds of its business, were performing better than expected, helping to offset the slowing United States economy, he said.  Predicted savings from combining Formica with Fletcher's Laminex business, about $13 million in 2007-08, were on track.

Chairman Roderick Deane said Fletcher's net earnings for the first four months of 2007-08 were ahead of the same stage last year both with and without the inclusion of Formica.

Fletcher was "comfortable" with analysts' forecasts for annual earnings after tax and before unusual items of between $450 million and $460 million.  After removing one-off tax and insurance benefits, last year's profit rose 5 per cent to $399 million. At more than $1 billion, Fletcher's construction backlog was at record levels, Mr Ling said.

Fletcher shares rose 12 cents to $11.30 yesterday.

Matariki Forests has suspended logging a forest in the Bay of Plenty, blaming tensions in the aftermath of police raids this month.  The company is confident of its right to log the 1300ha Matahi Block because its research has uncovered a document made of calf skin dating back to the 1890s it says supports its ownership claim.

Matariki Forests was in dispute with the Omuriwaka hapu over its right to log the Matahi Block before the police searches for weapons associated with alleged military training camps in the Bay of Plenty increased tension in the region.  Matariki Forests stopped logging the Matahi Block last year when Maori blockaded access and vandalised equipment. In July the company called police in to remove a portable sawmill in the block. The mill, vehicles and two buses were removed.

Matariki Forests' investors include United States forestry giant Rayonier, as well as Deutche Bank and AMP. It bought 95,000ha of forests from Carter Holt Harvey for $435 million and forests owned by Rayonier were also put in the venture.  The disputed Matahi Block is worth about $15m.

Matariki Forests' director Paul Nicholls said none of his staff had been threatened by weapons but the company was preparing to go back in to log the block when the police raids occurred and had consequently suspended that decision.  He said Omuriwaka were the only the hapu to dispute the company's right to log.

The Matahi Block is part of the Tahora Block purchased by the Crown in 1896. It was used for soldier settlement after World War 1. Later owners included John Spencer, the toilet paper empire owner, and Carter Holt.  Mr Nicholls said the company has researched the title, though John Hillman-Rua, spokesman for the Waimananuku Iwi Authority, disputes the title belongs to the company in today's Sunday Star Times newspaper.  The company stopped logging in 2006 when title was disputed. 

"We got a land information specialists to research the title and he found the original document in the National Archive. It was written on calf skin and it is the equivalent of 54 A3 pages of signatures," he said.  The signatures were gathered from 1893 to 1896 and the document was written in both Maori and English. The document had a map of a block 213,000 acres (86,241ha) in size sold for 2.5 shillings an acre.

Maori oral history contradicts the document. The company's position is that the Waitangi Tribunal should be the mechanism for resolving the matter.  "Blocking us from harvesting the forest is not going to get us anywhere," Mr Nicholls said.

He said the company had also been accused of dishonouring tapu burial sites and other sites but it did not believe it had done this.  It had discovered that Carter Holt had encountered problems logging the block previously.  Forestry industry executives have said that at one point the Ureweras were to become a major plantation forestry region of similar size to the central North Island.  But the plan never went ahead and Carter Holt bought new land in Northland instead.

Blocks in the Ureweras are left from that time.  Matariki Forests wants to replant the forests it harvests in the area.

Competition concerns are likely to prevent Fletcher Building from buying all of the wood products assets put up for sale by Carter Holt Harvey (CHH), analysts say.  However, Fletcher Building could end up with most of the New Zealand businesses, paying around $800 million and staying within its debt comfort zone.  Auspine, Hyne or Weyerhaeuser are the likely buyers of the Australian assets.

CHH's wood products businesses, put on the block by Graeme Hart's Rank Group, have a price tag of $2 billion to $2.5 billion.  The Commerce Commission and its trans-Tasman counterpart, the Australian Competition and Consumer Commission, would balk at Fletcher Building swallowing all of the operations on sale - Wood Products NZ, Wood Products Australia and the Carters retail chain, First NZ Capital analyst Andrew Mortimer said.

Fletcher Building owns the Placemakers chain, which buys more than half of CHH's domestic lumber. It therefore has a strategic opportunity to lock in security of supply, Mortimer said.  But the potential for vertical integration would worry the Commerce Commission.

A bigger hurdle was the particle board market which would be 100% owned by Fletcher Building if it subsumed CHH.  The companies dominate the medium density fibreboard market between them and Mortimer said a combination of these assets was unlikely to be allowed.  Combining CHH and Placemakers presented fewer problems as consolidation would comprise only 36% of the building supplies market.

Fletcher Building might also not want to see CHH fall into a competitor's hands. The combined sales in the trade market, however, "might aggregate to around 45% within acceptable levels so as to not substantially lessen competition".  "Of more concern might be the consolidation of market share in certain product lines, including timber, insulation and wallboard."  The company faces a big hurdle if it wants to own both CHH's manufacturing and distribution businesses.

Nevertheless, Fletcher Building should be interested in the New Zealand wood products and distribution businesses, given the improved distribution capability and the ability to secure supply, Mortimer said.  More margin might be available in the supply chain under Fletcher Building ownership.  However, there was little value for Fletcher Building in CHH's Australian assets. "Fletcher would have no particular distribution advantage and would acquire only a modestly attractive market share."

US firm Weyerhaeuser, which has just sold its New Zealand forestry interests, was a more natural candidate for the Australian business. CHH, Weyerhaeuser and another company, Hyne, command around 60% of the softwood lumber market across the Tasman and the acquisition of CHH would present both with an excellent consolidation opportunity.

The Australian market is fragmented and the CHH sale presents a chance for one of these three players to consolidate. Interested parties are understood to be conducting due diligence and indicative bids for CHH are expected this week. Final bids are due by late November.

Fletcher Building is teaming up with Australian rival Boral to bid for Carter Holt Harvey's Wood Products, Carters and Interion businesses being sold by billionaire Graeme Hart in what is expected to be a $2 billion plus deal.

Indicative offers for the Carter Holt assets were due last week. Market sources said yesterday that the Fletcher-Boral combination was facing its main competition from international private equity fund CVC Capital Partners.

Mr Hart is selling wood-based building items manufacturer and marketer Wood Products New Zealand, which has 12 manufacturing sites, Wood Products Australia, which has six, New Zealand's Carters building materials chain and Interion, which markets and sells furniture, joinery and construction products. Combined, these assets are forecasting 2008 earnings before interest, tax, depreciation and amortisation of about $300 million.

Sources suggested that, if successful, Fletcher and Boral planned for the Kiwi firm to take the bulk of the New Zealand assets and Boral to pick up those in Australia. Mr Hart's Rank Group has told Carter Holt staff it wants to complete a sale by the end of the year.

Boral is Australia's biggest building and construction materials supplier and also has operations in the United States and Asia. Kylie FitzGerald, Boral's general manager of corporate affairs and investor relations, declined to comment on "market speculation".

Fletcher chief executive Jonathan Ling said he could not comment "at the moment".

Staff at CVC's Sydney office did not respond to requests for comment. CVC's history in the trans-Tasman building industry includes ownership of laminates and panels business Laminex and insulation, concrete and roofing group Amatek. Ironically, it sold both to Fletcher - Laminex for $754 million in 2002 and Amatek for $582 million - in 2005.

It was unclear whether Rank had received further offers. US forestry group Weyerhaeuser, which sold half of a 67,000-hectare Nelson forestry plantation to partner and fellow US firm Global Forest Partners in June, is touted as a potential bidder. Tasmania forest products group Gunns, which owns a veneer factory in Christchurch, is also a possible bidder. Gunns declined to comment.

Fletcher completed the $1 billion acquisition of US-based benchtop group Formica on July 2, issuing $328 million of new shares to help pay for the deal. It might issue shares to help fund another big buy.

Tower equities fund manager Paul Robertshawe said Fletcher should easily be able to convince investors of the merits of buying Carter Holt assets. Fletcher had a good five-year track record, had not overpaid for previous acquisitions and its finances, with gearing, or debt-to-equity, of 46 per cent were not stretched. "If they come to us with a deal that makes sense I don't think shareholders would be upset about the timing," Mr Robertshawe said.

However, a Fletcher purchase would need Commerce Commission approval as its businesses have significant crossover with Carter Holt, notably PlaceMakers and Carters. Since completing the $3.3 billion acquisition of Carter Holt in March 2006, Mr Hart has already recouped about $1.9 billion.

New Zealand billionaire Graeme Hart has sold his shareholding in Goodman Fielder, the Australasian food giant he floated in 2005. The company said late last night that the near-20 per cent stake of New Zealand's richest man had fetched about A$562 million ($675.8 million).

Analysts said the sale would free up Hart to pursue acquisitions in the packaging sector, where he has been building assets, but was unlikely to put Goodman Fielder into play as a takeover target in the near future.

The sale of 265 million shares by Hart's Burns, Philp and Co through a subsidiary, BPC Finance (NZ), was made via a bookbuilding underwritten by Credit Suisse, Goodman Fielder said.  The company, whose brands include Mighty Soft, Meadow Fresh, ETA and Meadow Lea margarine, had its Australian shares placed on trading halt late on Thursday pending an announcement. Trading was also halted in New Zealand yesterday with a closing price of $2.70 a share.

CommSec analyst Grant Saligari noted that Goodman Fielder and other food and beverage firms faced tough conditions as Australia's worsening drought has pushed up wheat, dairy and oilseed prices. Goodman Fielder's shares last traded in Australia at A$2.23. They are little changed from the start of the year, but rose as high as A$2.80 in April. The broader market is up 18.5 per cent this year.

The Australian Financial Review said institutions had been asked to bid for Hart's stake at between A$2.12 a share and Thursday's close. Goodman's 2006/07 financial year net profit fell 38 per cent to A$239.8 million. It made a number of small acquisitions in the past year, including River Mill Bakeries in New Zealand.

Hart's sell-out of Goodman Fielder is the latest in a line of major deals by the one-time tow-truck driver. He bought and de-listed forest products giant Carter Holt Harvey last year for $3.3 billion and has since put its building supplies business up for sale, including 18 sawmill and manufacturing plants in NZ and Australia. The building supplies business sale is expected to fetch more than $2.3 billion. Macquarie Equities investment director Arthur Lim said the sale of assets did not necessarily mean Hart had another acquisition lined up.

However, he did have a track record of surprising the market. Hart has sold most of Carter Holt's forests for up to $2 billion, and the head office, various retail depots and packaging plants for more than $300 million. A successful sale of the timber products business would see Hart more than recover his outlay, with the strategic retention the firm's packaging division.

This year, Hart paid US$338 million for North Carolina-based Blue Ridge Paper Products and is merging it with Evergreen Packaging in Arkansas. Meanwhile, he has also completed a $3.2 billion acquisition of Swiss packaging group SIG.

Hart may be building a paper packaging empire but Lim would not be surprised to see him make an acquisition in another direction. "How about SkyCity? It wouldn't surprise me. It's a company that's been mismanaged. It's got core assets and it's got assets scattered about Australia and New Zealand that lends itself potentially to being sold." Hart's sell down would not trouble Goodman Fielder, Lim said. "Goodman Fielder has been its own company for quite a while now."

Selling out

• Graeme Hart has sold his Goodman Fielder holding.
• The sale of the 265 million shares was made via a bookbuilding underwritten by Credit Suisse.
• Hart is also selling Carter Holt Harvey's building supplies business for more than $2.3 billion.

Graeme Hart isn't wasting any time with the sale process for Carter Holt Harvey's Building Supplies division - expected to fetch in excess of $2.3 billion.  Hart and Rank Group expect to receive indicative bids by October 12, have due diligence under way by mid-October and receive final bids by late November.

The timetable is included in a sale flyer being circulated by Hart's bankers.

The Building Supplies business includes Woodproducts NZ, Woodproducts Australia and the Carters retail chain.  The division is projected to have total sales of about $2.2 billion in the 2008 year and ebitda of $305 million.  Rank decided to put the business up for sale after getting unsolicited inquiries from parties interested in acquiring the whole business, the flyer says.

The sale of the business in parts hasn't been ruled out.  A trade sale or a transaction involving private equity interests is understood to be the most likely outcome.

Since Hart paid $3.3 billion for Carter Holt Harvey and delisted the top-tier company early last year he has sold most of its forests for somewhere between $1.5 billion and $2 billion, and the company's head office, various retail depots and packaging plants to Australia's Valad Property Group for just over $300 million.

Graeme Hart has put Carter Holt Harvey's Wood Products business on the block in a deal that could rival the size of Telecom's $2.24 billion Yellow Pages sale.  Wood Products manufactures and markets wood-based building items including timber, plywood, laminated veneer lumber and interior decorative materials.

Market sources said yesterday that Mr Hart was seeking bidders for Wood Products in a sale being managed by investment banks First NZ Capital and Credit Suisse First Boston.  Wood Products has 12 manufacturing sites in New Zealand and six in Australia.  Its brands include Pinex, Laserframe, HyJoist, Bestwood, Ramsey Roundwood, Ecoply and StructaFlor.  The business is thought to produce annual earnings before interest, tax, depreciation and amortisation of about $300 million.

In the biggest New Zealand asset sale so far this year, Telecom sold directories business Yellow Pages to Hong Kong-based CCMP Capital Asia and Canada's Teachers' Private Capital for $2.24 billion in March.  Some sources felt Wood Products could fetch a similar price.

Big international private equity groups, possibly including Cerberus Capital Management, Pacific Equity Partners, CVC Asia Pacific and Champ, are thought to be the most likely bidders.  Mr Hart completed the $3.3 billion acquisition of Carter Holt Harvey in March 2006, delisting what was the stock exchange's third-biggest company.  Since then Mr Hart, whose fortune is conservatively estimated at $2.75 billion, has sold Carter Holt's forests to US timber management organisation Hancock Timber Resource Group for about $1.6 billion and properties including the company's Auckland base to Australia's Valad Property Group for more than $300 million.  He has also spent about $4.5 billion buying Swiss company SIG, Blue Ridge Paper Products of the US and packaging assets from US firm, and former Carter Holt parent, International Paper.  This has transformed Rank Group into the world's second-biggest drinks packager, behind Switzerland's Tetra Laval Group, with about a 15 per cent market share.

After buying Carter Holt at a time of weak international conditions for forestry companies, Mr Hart is looking to sell as the Agriculture and Forestry Ministry predicts 30 per cent growth in forestry export earnings to $4.65 billion in the next four years.

Carter Holt has about 10,000 staff and four other business units - Pulp & Paper, Packaging Carton, Packaging Corrugated and building products chain Carters.

An Indian businessman has paid a record price for an apartment, parting with $11 million for a new Auckland penthouse.  But high taxes mean he may spend little time there.

Mike Panjwani - who has business interestsin New Zealand, India, Singapore, Europe and Dubai - has bought levels 29 and 30 of the Sentinel apartment block in Takapuna.  Mr Panjwani has bought the apartment unconditionally, but will not be moving in until early next year because the property is a shell.

Speaking from Singapore yesterday, Mr Panjwani said he might only spend a few weeks a year in the penthouse.  "We don't know how much time we're spending there. My family can't afford to spend months in New Zealand. The taxes are very high."  Some Sentinel units have sold more than once, and units that fetched around $900,000 originally had resold for more than $1 million. 

The 117-unit tower will open in December.  The two penthouse levels are connected via an internal staircase. The unit was sold with a dedicated lift, four basement carparks, lap pool, spa and large glass-walled decks.

Barfoot & Thompson agent Wayne Muir, who acted for Mr Panjwani, said the businessman was impressed with the seaside suburb.  "He sees Takapuna as a premiere urban seaside location and was impressed by the quality and location of the Sentinel."

The penthouse is yet to be fitted out, but will have a combination of bespoke hand-crafted carpet and natural stone flooring.  Apartment walls will be able to be moved, and the apartment will include a home theatre, motorised windows, gas fireplaces, underfloor heating and large deck areas.  Mr Panjwani has owned a house in St Marys Bay, central Auckland, for a number of years. Two years ago, he sold a collection of large Auckland investment buildings worth more than $25 million through his company Empress Leisure to apartment specialist Blue Chip.

Caption: Street level of the 30-floor Sentinel apartment building in Takapuna, Auckland.

The sale means property developer David Henderson's Princes Wharf apartment is now the most expensive penthouse on the market.  That apartment, which went on the market earlier this year and was tipped to fetch $10 million, remains unsold. The apartment occupies the entire top level of the Princes Wharf block above the Hilton Hotel.

Businessman Colin Giltrap is understood to have set the previous apartment price record for a penthouse in Lighter Quay's North, on Auckland's waterfront.  Mr Giltrap previously lived for about 20 years in a Herne Bay waterfront home that he sold four years ago for $7.2 million.

MILLION-DOLLAR DREAMS

• Most expensive apartment for sale: $10 million Princes Wharf penthouse owned by property developer David Henderson.
• Most expensive house (not for sale): Graeme and Robyn Hart's sprawling $20 million Glendowie mansion.
• Most expensive property for sale: Pakatoa Island, Hauraki Gulf, $35 million, owned by businessman John Ramsey of Crusader Meats.
• Next most expensive: Cowes Bay estate on Waiheke Island, $30 million, 36ha with 1200sq m plantation-style mansion

Carter Holt Harvey's head office in Manukau has been sold to Australia's Valad Property Group, which is buying A$277.3 million of property from Carter Holt.

The 8.5ha site, legendary for once having a nine-hole golf course used by Carter Holt executives, is the jewel in the collection of properties sold. It is the biggest of five development sites being purchased. Billionaire Graeme Hart, Carter Holt's owner, is not commenting on the transaction.

Mark Frinsdorf, Valad's head of capital transactions, said sale and leaseback agreements would operate on most of the properties but the head office property was earmarked for development by Valad. He said no decisions had been made on what to build on the site, but a high-tech business park or a bulky goods/office precinct were possibilities. Valad had looked at the Lion Nathan brewery site sold in Auckland last week but had decided on the deal announced yesterday. "We do think it is a very strategic site," Frinsdorf said.

The portfolio purchased includes 15 Carters building supplies sites, which are subject to nine-year sale and lease-back agreements with two six-year rights of renewal. Similar terms apply to 10 packaging plants in the deal, five of which are in Australia. Valad will earn a yield of 7.1 per cent on the properties. The company already owns buildings in New Zealand, including Maritime Towers in Wellington and West Plaza in Auckland.