fund managers sell out

Fund managers sell-off GunnsMICHAEL STEDMAN

May 27, 2010 12:01am

TWO of Australia's largest fund managers have engaged in a mass offloading of shares in ailing timber giant Gunns.

Perpetual Ltd and IOOF Holdings have been revealed as the major contributors to Gunns' share price slide in just a few devastating days on the ASX.

Both fund managers notified the stock exchange of substantial shareholding changes yesterday, which reveal large volumes of Gunns shares have been sold off since May 18.

Gunns' shares hit a 20-year low of 26.5c during trading on Tuesday and rebounded slightly to close at 28.5c yesterday.

In the past two days, more than 10 per cent of the company has changed hands.

Shadforths financial analyst Matthew Torenius said the market could be in for more of a shake-up if Perpetual and IOOF decided to abandon the company completely.

Together the fund managers hold about a 20 per cent stake in the company and each has sold off about 1 per cent of their shareholdings in the past week.

"I think it shows they have had enough and think they are better off investing that money elsewhere," Mr Torenius said.

"If those two fund managers are looking to completely get out of their holding of around 180 million shares between them, then there are going to be substantial movements on the share registry.

"That may well lead to a further shake-up within the company."

Institutional investors have expressed their displeasure that former executive chairman John Gay is still tied to the company as chairman of Southern Star, which has primary responsibility for securing finance for the pulp mill.

Also yesterday, independent investment firm Bell Potter described the pulp mill as "a long shot", which could not be ascribed value.

However, Bell Potter said it did see value in a "break-up scenario" with land valued at $567 million and forest assets valued at $268.2 million.

Mr Torenius said it would still be a brave buyer who viewed Gunns as a takeover target.

"It is going to take a patient and brave company to take on a takeover of Gunns, given the environment and the baggage that comes with the company," he said.