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Commerce Commission Clears Shell’s Application

Commerce Commission Clears Shell’s Application To Purchase Fletcher Challenge Energy

AUCKLAND, November 17, 2000 – Fletcher Challenge Limited welcomed the release of the Commerce Commission decision today, clearing a major hurdle for Shell and Apache Corporation to complete their purchase of Fletcher Challenge Energy.

“We are delighted that the Commerce Commission has approved the application by Shell to acquire these assets,” said Roderick Deane, Chairman of Fletcher Challenge. “The Board is unanimous in its recommendation of the Shell and Apache offer, and the Commission’s clearance today paves the way for completion of the transaction.”

The Shell and Apache offer to shareholders for each Fletcher Challenge Energy share is:
 US$3.34 in cash
 One share in Capstone Turbine Corporation for every 70 Fletcher Challenge Energy share held, and
 One share in a new company, Rubicon.

At yesterday’s NZD/USD exchange rate of 0.4000 and market price of Capstone shares of around US$35, the total value of the offer to Fletcher Challenge Energy shareholders is $10.50 per FCE share. This is a 34% premium over the closing price of Fletcher Challenge Energy shares on the day of the original announcement of the Shell and Apache deal, and a much higher 56% premium over the prevailing share price in July of around $6.75 per share, prior to the Shell application being made public.

“This is also an excellent outcome for New Zealand. It brings additional international expertise and security to the industry as well as ensuring that New Zealand exploration and production will be maintained at world-class standards,” Dr Deane said.

In October, Fletcher Challenge announced its recommendations for the separation of Energy, Building and Forests Divisions. The purchase of the Energy Division was always subject to Commerce Commission and other regulatory approvals. Early next year, shareholders will vote on the recommendations for the Energy and Building Divisions. The recapitalisation of the Forests Division through a rights offer will be completed early in December. Documentation will be distributed to shareholders in mid-February for a shareholder meeting to approve separation (see attached backgrounder).

Timetable:

The indicative timetable, which may change as regulatory and Court processes require, is shown below. Shareholders will be kept informed of any changes.

Early December Forests rights offer closes

Mid-February Documentation mailed out for Separation meeting

Early March Shareholder separation meeting and vote on recommendations

Late March Separations completed


Ends

Backgrounder

As reported, October 10, 2000
(with adjusted dates)

Fletcher Challenge sets course for its three Divisions


A programme to complete the Fletcher Challenge Group restructuring and separation of the remaining three targeted share Divisions was announced by Dr Roderick Deane, Chairman of Fletcher Challenge Limited.

In announcing the outcome, Dr Deane said “We indicated when we announced the sale of the Paper Division in April that the Board would continue to evaluate all potential outcomes for the Building, Energy and Forests Divisions, and this has now been completed. The Directors, together with the senior management and external advisors, have been involved in a comprehensive review and evaluation process to determine the announcements we are making today. Our over-riding goal in the process has been to maximise value over time for shareholders whilst adhering to a tight timeframe. I can say unequivocally that the Board is unanimous in recommending these restructuring outcomes, as the best value for shareholders, and a good outcome for New Zealand.”

Recommendations to Shareholders:

Building Division
 Will be separated as a stand-alone publicly listed entity named Fletcher Building

Forests Division
 Will be a stand-alone publicly listed entity named Fletcher Challenge Forests

Energy Division
 Will be sold to Shell and Apache Corporation for total transaction value of $4.3 billion (US$1.72 billion)

And a new New Zealand-based company, Rubicon
 Will be established to commercialise selected emerging technologies
 Will play a key role in facilitating the Group restructuring process

It is intended that full information and disclosures on each of the recommendations will be provided to shareholders in mid-February in preparation for the shareholder approvals in March 2001.

Impacts:

For Building Division shareholders

 A stand-alone listed company, with a clear focus on the New Zealand building arena

 Realignment of the portfolio towards core activities, including ‘new growth’ opportunities refocused on New Zealand

 A final dividend of eight cents per share was declared to shareholders of record on 27 October and paid on 9 November, 2000


For Forests Division shareholders

 A stand-alone listed company, targeted to the marketing, processing and management of New Zealand-grown Radiata plantation forestry

 A re-capitalisation of the company, through a fully underwritten pro-rata 2:1 rights issue of Forests preference shares at $0.25 per share, raising $414 million of new equity, with cash to be paid in full on 8 December 2000

 Rubicon will also subscribe for a placement of $90 million of Forests ordinary and preference shares

 Forests’ biotechnology and South American assets will be sold to Rubicon for $80 million


For Energy Division shareholders

 Receipt of

 US$3.34 per share in cash

 An entitlement to receive 1 Capstone share for every 70 Fletcher Challenge Energy shares held

 1 share in the new entity – Rubicon – for every Fletcher Challenge Energy share held

 There will be no final Fletcher Challenge Energy dividend

 The acquisition by Shell and Apache now subject to regulatory consents only in Canada, the United States, and Brunei


The new company, Rubicon

 Will be established, on separation, as an active business with a defined strategy to commercialise emerging new technologies that have high-growth, high-margin potential

 Will play an important role in the restructuring process, by supporting the recapitalisation of the Forests Division, and acquiring some Energy assets

 Will initially consist of:
 The biotechnology assets and South American forestry assets acquired from the Forests Division for a combined price of $80 million
 The Challenge! service station network of strong New Zealand small businesses, and the Brisbane, Timaru and New Plymouth terminals which support them


 $34 million in cash from the sale of 14% of the New Zealand Refining Company
 An alliance with Genesis Research and Development in relation to environmental services
 Commitments to subscribe for a placement of $90 million of Forests shares and also to sub-underwrite $170 million of the Forests rights issue

The entire separation programme, which is subject to shareholder approvals, will be undertaken by way of a Court-approved plan of arrangement, as was the case with the sale of the Paper Division to Norske Skog.

“The Board and management are pleased and satisfied about the outcomes announced today,” said Dr Deane. “We believe they will provide the best value to shareholders, will retain some key New Zealand activities, and will establish successful and effective New Zealand-based businesses in building, forestry and the new economy. It will also establish our energy business in a position of scale for the future. Importantly, this outcome will retain a New Zealand focus for activities which have been a part of the New Zealand economy for many years, and also provide the catalyst for commercialisation of exciting new technologies from a New Zealand base.”


Ends

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