Another letter for Wattie’s shareholders

Press, 24 January 1984, Page 8

Another letter for Wattie’s shareholders

•PA Wellington N.Z. Forest Products, Ltd. will write to Wattie Industries, Ltd, shareholders restating claims made about the capital gains they would make if they accepted the present offer. Forest Products asserted, in its offer to Wattie’s shareholders, that they would make a capital gain of 24.4 per cent on ordinary shares, by accepting the Forest Products’ shares and cash. However, the estimated capital gain is based on Wattie’s shareholders receiving the N.Z. Forest Products’ bonus issue of shares, when the offer specifically excludes this, reported the “Dominion” newspaper yesterday.

When the bonus is excluded then the capital gain to Wattie’s shareholders falls to 12 per cent for ordinary Watties shares. The offer claims a capital gain of 19.4 per cent for both classes of specified preference shares, when in fact it would total only 7.4 per cent, excluding the bonus issue.

The chairman of N.Z. Forest Products, Mr L. M. Papps, said last evening

that he was aware of the issue and that the company would be sending out another letter to Wattie’s shareholders.

He said the directors had looked at the issue, and a letter was drafted and approved last Friday. He said he would rather not comment further except to say the letter would be “expanding on one or two points.” This gives no clues on whether the offer will be redrafted to include Wattie’s shareholders in the bonus issue of shares, or whether it will redefine the claims about capital gains. Mr Papps said the overstatements were not an oversight. “It’s a question of the way you look at it — I’d rather not say any more than that.” It is believed that the Stock Exchange — which has already shown its displeasure at the terms of the Forest Products’ offer for Wattie’s shares — would regard the overstatement as very serious because they gave Wattie’s shareholders an inaccurate impression. The chairman of Wattie’s, Mr John Haworth, would not comment on the revised

capital gain figures. He said that Wattie’s directors were preparing their letter to shareholders. Wattie’s directors, in the absence of any representatives from Goodman Group, Ltd, which holds 35 per cent, have recommended acceptance of the Forest Products’ bid.

Forest Products is only seeking up to 65 per cent of Wattie’s. Its offer does not include Wattie’s shares held by Goodman.

The calculations in the Wattie’s shareholders offer uses a Forest Products’ share price of $6.75 which includes both a bonus and dividend entitlement. If these are subtracted the theoretical Forest Products’ share price would be $6.05. The recalculated figures also reduce the worth Forest Products places on Wattie’s from $550 to $5OO million.

The Forest Products’ offer also takes no account of the likelihood that its share price should fall somewhat if the Wattie’s offer succeeds. This is because the earnings per share will fall because of the larger number of shares on issue.

Further report, page 18