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CNIFP Price Sensible And Not Renegotiable

Auckland, 30 July 2002 – Fletcher Challenge Forests today responded to comments from former director Mr Stephen Hurley of Xylem, proposing that the Company should renegotiate the purchase price of the Central North Island Forest Partnership (CNIFP) assets.

Chief Executive, Terry McFadgen said, “After 12 months of negotiation we are absolutely sure that the agreed price of approximately US$650 million is the Receiver’s bottom line. We know he has previously received at least two competing offers around this level including an offer involving a major international forestry fund. Why would the Receiver sell for less when product prices are continuing to improve, markets are looking good and the senior lenders are getting all their interest paid?

“In addition, the price is below our base valuation, even before taking into account the export marketing and strategic benefits of the acquisition,” he added. The price is also within the fair value range assessed by the Independent Expert, Grant Samuel & Associates Limited.

Mr McFadgen noted that the recent appreciation of the New Zealand dollar and recently negotiated price increases for August export log sales had further increased the attractiveness of the transaction. “Our markets in Korea, China, Australasia and the USA are all strong, and Japan is now showing signs of improvement with May housing starts up nearly 6%,” he said.

He emphasised that the base case financial forecasts used in the Company’s Explanatory Memorandum were conservative. “We have taken a conservative case to demonstrate the robustness of the financing solution,” he said, “and have assumed a 7% decline in average NZ dollar log prices for 2003. In fact, prices are stable or rising at the moment in all our major markets.”

The independent Directors remain entirely comfortable with both the US$650 million purchase price and the proposed financing solution.


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