Credit Suisse First Boston

Feltex liquidators are demanding more than $20 million from directors, alleging various breaches of the Companies Act and Financial Transactions Reporting Act.  A liquidators' report reveals the total claims and outlines six possible causes of action against the directors.

McDonald Vague consultant and liquidator John Vague said yesterday there were "obviously" questions over whether the carpet maker traded while insolvent.  However, proceedings might not be filed for months and the process would be drawn out, he said.  "At present we think the total claims are $20 million plus., but that, of course, can change. It can grow, it's certainly not going to get less."

Feltex's shares were sold for $1.70 each in a June 2004 float by Credit Suisse First Boston Asian Merchant Partners, a private equity group.  The company was placed in receivership by its bank, ANZ, in September last year.  The company's assets have since been sold to rival Godfrey Hirst, which has shut two of Feltex's New Zealand factories at the cost of more than 250 jobs.

Mr Vague said the directors included three who resigned months before the receivership.  They are Craig Horricks, former chief executive Sam Magill and Fairfax Media NZ chief executive Joan Withers.  The others were Feltex directors at the time of the receivership: John Feeney, John Hagen, David Hunter, chairman Tim Saunders and Peter Thomas.

McDonald Vague's report outlines six potential breaches of the Companies Act and Financial Transactions Reporting Act.

Mr Hagen said the former directors were "quite confident" they took legal advice at appropriate times and disclosed everything that needed to be disclosed.  "(We) think any action by the liquidator would be unfounded."  Mr Saunders is overseas and did not respond to interview requests yesterday.  He is also a Contact Energy director and told its annual meeting in October last year that he was confident he acted properly at all times and in the best interests of Feltex shareholders.

"Clearly the Feltex board, and by implication myself as chairman, carry a responsibility for contributing to the demise of the company. It has been a horrible experience and not one I'd wish on anyone."  Mr Thomas, chief executive in the run-up to the liquidation, and Ms Withers had no comment.

Fletcher Building has been a sharemarket darling for the past five years but investors might have missed out altogether if Fletcher Challenge's board had taken private equity advances more seriously.  In September 2000, when the Fletcher Challenge group was being broken up, a private equity firm came knocking on the door expressing interest in Fletcher's building business.

Though the offer was not made public, BusinessDay understands it came from Credit Suisse First Boston Asian Merchant Partners and was worth about $2.82 a share.  CSFB Asian Merchant Partners is the firm that floated ill-fated carpet maker Feltex in 2004.

Unimpressed with the private equity advances, Fletcher Challenge's board jilted CSFB.  Fletcher Building, with businesses which include PlaceMakers, Fletcher Construction, Golden Bay Cement and Gerard Roofs, listed on the sharemarket as a standalone company in March 2001.

Its shares, which started at $2.23, hit a record high of $13.42 in May after Fletcher Building raised $328 million in a placement of new shares to help fund the $1 billion acquisition of benchtop group Formica. Though the shares have slipped back, they are well above $12.

Roderick Deane, formerly Fletcher Challenge chairman and now chairman of Fletcher Building, recalls that the offer came when the breakup of Fletcher Challenge was well under way.  It would have been a "huge hassle" to address the CSFB offer.  Furthermore, Dr Deane describes the offer as indicative with numerous conditions attached, giving a range of prices rather than a specific one.  "It just seemed to us that it didn't have a large enough premium in it to warrant pursuing and it was too indefinite," Dr Deane says.  "If they'd actually made a firm, unconditional offer then of course the obligation to disclose would have been much more immediate."  The offer was subject to a confidentiality agreement and Dr Deane says the other party did not want it made public.

CSFB spokeswoman Elizabeth Rudall declined to comment.

Fletcher Challenge was broken up in New Zealand's biggest corporate restructure in 2000-01.  Fletcher Paper was sold to Norske Skog for $5 billion.  Shell and Apache Corporation bought Fletcher Energy for about $4.8 billion. Fletcher Forests was listed.  Today, having sold all its forests and its wood processing assets bar a sawmill and mouldings plant in Taupo, it is known as Tenon.

Dr Deane says Fletcher Building was always regarded as the potential crown jewel but it had not been "polished up" for some time.  After analysis the board decided what its strategies should be and pooled the lessons individual directors had learned.  Chief executive Ralph Waters joined in mid-2001.  Since then Fletcher's share price has surged as it has cut costs, made the most of strong construction and infrastructure demand, and expanded in Australia by spending $1.6 billion on acquisitions.  Mr Waters handed the reins to Jonathan Ling last September.

With Formica, Fletcher is now the world's biggest maker of laminate boards for use in kitchens, bathrooms, shops, hospitals and schools.  After starting as a company dependent on the domestic residential building market, it is now on track to make more than half its revenue overseas.  "When we listed Fletcher Building it was No17 on the stock market. Today it's No2 in market cap. I think that's the vindication."

Graeme Hart's Burns Philp will give the New Zealand sharemarket a huge shot in the arm when it spins off its Goodman Fielder food business this year.

The Business Herald understands Burns Philp aims to offer investors an 80 per cent stake in the business, worth A$1.3 billion to A$1.9 billion ($1.4 billion to $2.07 billion). The exact value of the offering is dependent on demand for shares. The Kiwi billionaire controls Burns Philp through his private company Rank, which owns a 54 per cent stake.

New Zealand investors, including retail investors, are expected to buy $200 million to $300 million of the shares with the rest going to investors in Australia, the United States, the United Kingdom and Asia.

The company will have a market value of about A$1.6 billion to A$2.3 billion. This will place it in the benchmark ASX-200 and the NZX-50 indicies and ensure reasonably strong demand from large institutions for the shares.

It will have a dual primary listing in New Zealand and Australia. Timing of the float, which will give priority to existing Burns Philp shareholders and holders of the company's converting preference shares, is unclear although Burns Philp has said it was aiming for the latter part of this year.

The company is to be created from the merger of the dairy and cured meat assets Rank bought from dairy giant Fonterra last month and Burns Philp's baking, spreads and oils business. In the year to last June, the business would have had sales on a pro forma basis of A$2.3 billion and trading profits of A$360 million to A$380 million. But bankers selling the shares are expected to make much of the growth in earnings.

The company is expected to have around A$1 billion of debt, giving it an enterprise value of around A$2.9 billion on a conservative estimate of its market value.

Since similar businesses trade on an earnings multiple of around seven to eight times prospective trading profits, the company should turn in around as much as A$414 million next year.

Much of the earnings growth is expected to come from the brands Hart acquired from Fonterra, including the dairy brands Meadow Fresh, Naturalea, Tararua and Chesdale and the Kiwi, Huttons and Top Hat cured meats brands.

These are expected to benefit from Hart's cost-cutting zeal. Many of the existing Goodman Fielder baking, oils and spreads brands - which include Molenberg, Quality Bakers, Vogels, Ernest Adams, Meadow Lea and Newman's Own - are mature slow-growth operations.

Many were also part of the Goodman Fielder business Burns Philp took over and delisted from the stock exchange in 2003. It is the prospects for these businesses that have muted enthusiasm for the company among Australian sharemarket observers.

The deal is a plum for investment banks, worth as much A$30 million in fees. Credit Suisse First Boston, which has a long relationship with Hart and Burns Philp, is expected to take the lead manager role. Its local affiliate, First New Zealand Capital, is sure to benefit. Other banks thought to be in the running to share the fees include Goldman Sachs JBWere, UBS and Macquarie Bank.

The structure
* Graeme Hart's Australasian food business Burns Philp will retain a 20 per cent stake in the Goodman Fielder business it plans to spin off on to the New Zealand and Australian Stock exchanges.
* The business will be sold to investors worldwide and is expected to have a market value of A$1.6 billion to A$2.3 billion.
* The company is to be created from the merger of the dairy and cured meat assets Hart's private company Rank bought from dairy giant Fonterra and Burns Philp's baking, spreads and oils business.