capital raising and equity stake, page-3

Second AFR update:

Dashing Kiwi-born billionaire Richard Chandler looks to be troubled Tasmanian timber company Gunns Limited’s white knight, with the now Singapore-based businessman set to emerge as a cornerstone investor in the controversial group.

It is understood that Chandler, worth a reported $US4 billion, is poised to take a stake in Gunns, whose shares were placed in a trading halt yesterday.

The halt was pending news of what the company said was a private placement and equity raising, details of which were still being finalised last night.

The company is believed to be in final talks with Chandler’s Richard Chandler Corporation towards the private investment group taking a 25?per cent to 40 per cent stake in the timber company.

The Launceston-based group is understood to be seeking to raise between $250 million and $350 million in fresh equity, which would help erase a significant portion of its $580 million debt.

This amount does not include the company’s Forests Hybrid notes, which have a face value of $120 million.

Gunns last week was granted an extension to its core $340 million lending facility by its group of 10 lenders, including the ANZ.Bank.

An extraordinary general meeting will likely be held in April to allow shareholders to vote on the removal of the 20 per cent shareholder cap to then allow the new cornerstone investor to come onto the share register.

Chandler, who is one of Singapore’s richest individuals, has invested in a wide range of industries including telecommunications, power, steel, banking and energy.

In November, he acquired a 15 per cent interest in the Abbot Point LNG facility.

He has a reputation for buying into and shaking things up at undervalued companies and working towards a re-rating of the stock, which would be a big win for long-suffering Gunns investors. He is believed to have approached Gunns before Christmas.

Chandler is the biggest shareholder in Canadian forestry group Sino-Forests.

Gunns boss Greg L’Estrange is working furiously to finalise several asset sales and lock down an equity joint venture partner for the company’s planned $2.3 billion pulp mill project.

With major shareholders believed to be supportive of this latest equity raising, and the repayment of debt on the cards, Gunns should be in a better position to negotiate with a joint venture partner to fully fund the mill, or even go it alone.