CITIC looks again at N.Z. forestry venture

By Geoff Hiscock
CNN Asia Business Editor

WELLINGTON, New Zealand (CNN) -- China's biggest investment trust CITIC will own 35 percent of New Zealand's Fletcher Challenge Forests under a proposed $200 million capital injection and restructure.

The plan is still subject to various approvals, but Fletcher Challenge Forests said Monday it had reached "understandings" with CITIC involving a possible revival of their failed joint venture, Central North Island Forest Partnership (CNIPF).

News of the potential deal prompted sharemarket interest in FCF, which put on 4 cents or 20 percent to NZ$0.26.

Under the plan, CITIC, the China International Trust and Investment Corp., is proposing to inject $200 million of new equity into FCF at NZ$0.37 a share.

This money will allow FCF, which is New Zealand's No. 2 forester, to bid for the joint venture's mills and forestry plantations, should a sale by the receivers to a rival third party, Vela Forestry, not proceed.

Share buyback

The CNIPF joint venture, which was managed by Fletcher Challenge Forests, failed in early 2001, owing banks about $650 million.

FCF chairman Sir Dryden Spring said that part of the overall deal involved a share buyback from the largest existing shareholder, Rubicon, which holds 17.6 percent of FCF.

If the deal proceeds, CITIC will end up with 35 percent of FCF.

Spring said both sides had worked hard to re-establish their relationship after the joint venture collapsed.

"The joint resources of our organizations are considerable, and China is New Zealand's fastest growing market for radiata pine," he said.

CITIC's 38 subsidiaries include those in Hong Kong, the United States, Canada, Australia, New Zealand and the Netherlands. It also has representative offices in Tokyo, New York and Frankfurt, a total asset base of about $43 billion and net profit in 2000 of about $306 million.