Fletcher ‘don’t sell’ surprises

Press, 4 February 1987, Page 37

Fletcher ‘don’t sell’ surprises

By

ADRIAN BROKKING

Fletcher Challenge, Ltd, the country’s largest industrial concern, sent shock waves through the sharemarket yesterday by issuing a “don’t sell” warning to shareholders.

In a statement, the Fletcher chairman, Sir Ronald Trotter, said the directors would be able to make a full statement to the Stock Exchange — explaining the reasons for the notice — no later

than tomorrow. A spokesman for the company said he could add nothing to the statement when asked whether it was related to the company’s bid for NZ Forest Products, Ltd (NZFP). Fletcher has been embroiled in a take-over battle for NZFP since, the beginning of November — the move being staunchly defended by the NZFP board. One of the reasons why the NZFP directors

rejected Fletcher’s overture was that they considered the offer price too low.

At the end of last year Fletcher’s said it would raise the bid.

However, if the “don’t sell” notice related to the Fletcher-NZFP take-over, one would think the warning not to sell would have come from Forest Products.

Fletcher’s share price has fallen in line with the market — from 582 c at the beginning of the

year to 460 c yesterday before the announcement, making the share quite cheap at a priceearnings ratio of just less than 10. But this would not justify a “don’t sell” warning either. The balance of probabilities has it that Fletcher Challenge is involved either in a major development such as a profitable rationalisation, or perhaps overseas expansion, or is in discussions with another com-

FCL is a big company even by international standards, and any one wanting to take a bite at it would have to be as big, if not bigger, even if it were only a partial take-over. There can be no doubt that a bid — partial or not — if made for cash would cause a sharemarket recovery. However, a move involving the issue of scrip would probably lead to a further weakening.