Wellington, New Zealand, October 17, 2005--Representatives of Feltex Carpets and its rival and would-be suitor Godfrey Hirst will meet in Melbourne this afternoon to discuss for the first time the specifics of a merger, according to Stuff.co.nz.
Godfrey Hirst secured a 5.83% stake in Feltex in June and said it wanted to talk about merging. Initial meetings resulted in little more than an information exchange, but last week Feltex chairman Tim Saunders said he expected details of any potential deal to be raised this week.
In the meantime, Godfrey Hirst finance director Jim Walsh's patience is fraying as Feltex moves ahead independently with a substantial restructuring. Mr Walsh wants to make progress on merger discussions; otherwise he suggests Godfrey Hirst might walk away.
Meanwhile, Forsyth Barr managing director Neil Paviour-Smith wants Feltex's value restored. Forsyth Barr was co-lead broker with First NZ Capital in Feltex's June 2004 initial public offering.
The shares were sold for $1.70 each but had slumped to 39c in June this year after two profit warnings within three months. On Friday they traded at 61c.
Forsyth Barr clients still hold a large chunk of Feltex shares. A list of the carpet manufacturer's top 20 shareholders, for example, shows Forbar Custodians and subsidiary Leveraged Equities Finance with 12.35 per cent between them.
Mr Paviour-Smith said Forsyth Barr's position was clear-cut.
"They (Feltex's board) should endeavour to maximise the returns available to shareholders from the business as is.
"And they should, equally, actively consider whatever Godfrey Hirst has put in front of them to assess whether that is a better outcome for shareholders and let us know accordingly."
Mr Walsh has raised the possibility of Godfrey Hirst becoming Feltex's main shareholder with a stake of more than 50% and the balance of Feltex's shares remaining listed. This could come about through a reverse takeover, with Feltex shares issued to Godfrey Hirst.
Last week, Feltex announced 235 job cuts, on top of 46 in July, and the closure of a Melbourne yarn plant. Feltex says these moves will save about $15 million a year before tax. More restructuring is set to be unveiled next month, as a review is held into Feltex's sales and marketing structure and Australian synthetic carpet operations.
Mr Saunders said Feltex's main concern was to ensure its shareholders were given benefits due to them from the future value of the company.
"Clearly we are ensuring that the benefits from this sort of restructure will be taken by the Feltex shareholders and won't be diluted," he said.
Mr Walsh said a Godfrey Hirst-Feltex combination would lead to dividend payments resuming for Feltex shareholders at the "earliest opportunity" and he expected a "significant" lifting in Feltex's share price from a deal.
Feltex shareholders received a 6c-a-share interim dividend in April but no final dividend.
