$807M FCL U.K. offer

Press, 19 December 1989, Page 25

$807M FCL U.K. offer

FLETCHER CHALLENGE HAS announced a £299 million (5NZ807.5 million) offer for the British paper firm, U.K. Paper, Pic. U.K. Paper has two paper mills in Kent and one in Scotland. It is Britain’s largest manufacturer of high quality printing paper, and also makes paper board, and is a paper merchant. The sales of U.K. Paper in ts last financial year were £219.3 million ($NZ646.3M). Before-tax profit was £I9M (SNZSI.3M). U.K. Paper’s merchanting business, William Guppy and Son, Ltd, is based at Harold Hill, Essex, and has eight branches, four opened since 1987. The purchase would give Fletcher Challenge, already strong in New Zealand, Australia, Canada, the United States and Brazil, an entry to the European Community, whose internal economic barriers are shortly to fall. The offer of 375 p (NZlOlc) for each U.K. Paper 10c par share, values the British company at £299M. Fletcher Challenge already owns 2,750,514 U.K. Paper shares. The directors of U.K. Paper and their advisers, J. Henry Schroder Wagg and Company, are recommending acceptance of the offer. They have described it as fair and reasonable. The directors, who beneficially own about 7.5 per cent of U.K. Paper’s shares, say they will accept the offer themselves. The offer is 11.6% above the closing price of U.K. Paper’s closing market price in London on Friday, and is 13.6% above an offer for U.K. Paper shares by Metsa-Seria, Pic, made on Thursday, December 7.

In a letter to shareholders on behalf of Metsa-Seria, the directors of U.K. Paper forecast a profit of about £ISM (SNZ4OM) for the financial year, which will end on December 31. Unused tax losses and tax relief against capital expenditure would result in an after-tax profit of about £13.9M ($37.5M), the director said. This is the equivalent of 17.4 p a share. The directors valued U.K. Paper’s land at current market value at £33.7M, or 42.3 p a share. Fletcher Challenge says U.K. Paper has a proven management team and record, as evidenced by its strong profit recovery since the 1986 management buy-out. U.K. Paper holds significant market shares and has a fine reputation in the higher valueadded printing and writing paper sector in Europe, Fletcher Challenge says. If the take-over offer is accepted, existing management of U.K. Paper will remain to run the European printing and writing paper business of Fletcher Challenge, which would become Fletcher Challenge’s base for European expansion and would be a largely autonomous unit. “This planned expansion could be both through complementary acquisitions and by internal growth, which would include the implementation in full of U.K. Paper’s existing plans to expand production capacity,” Fletcher Challenge says in a statement. U.K. Paper concerns about pulp supply would be mitigated by the ability at its option to purchase pulp from other companies in the Fletcher Challenge group. The offer is being made on behalf of Fletcher Challenge by MacArthur and Company. Fletcher Challenge says the offer is final and will not be increased.