TIMBER company Gunns could be in for a shake-up after confirming yesterday a Kiwi billionaire with a history of turning around companies in distress has bought a 40 per cent stake.
In a move financial analysts described as a ``shot in the arm'' for the struggling pulp mill project, the Singapore-based investor Richard Chandler will pay $150 million to become the major shareholder in Gunns.
Gunns will also issue 1.3 shares for every one of the existing 848 million shares at 12 cents to raise another $130 million if fully subscribed.
TG Financial's Tony Gray said the $280 million capital raising exercise, combined with asset sales should enable the company to clear most, if not all of its debt by the end of the year.
``They needed a circuit breaker, something that gets things moving in a positive direction and this is it,'' Mr Gray said.
Mr Chandler, who is worth $4 billion, will take a seat on the board and is expected to push to restructure the company.
Managing director Greg L'Estrange's contract expires at the end of June, with no word on whether he will seek another term.
In a statement, Mr L'Estrange said the new capital would provide certainty and stability for the company to finalise the financing structure for the construction and operation of the mill.
Richard Chandler Corporation senior adviser Alan Kelly said the corporation would work with Gunns management to ``catalyse'' the pulp mill development.
``We see its (Gunns') future as building a foundation for sustainable development and economic growth which will provide a future for the Tasmanian forestry industry,'' Mr Kelly said.
Analysts say the injection of funds will put Gunns in a strong position to secure a joint venture partner to build the $3 billion Bell Bay pulp mill.
``They could proceed with more authority and confidence with any joint venture partner,'' Mr Gray said.
Mr Gray said such a large rights issue would have a ``very dilutionary'' effect on existing shareholders, reducing their total stake to about 20 per cent of the company.
``However, a little bit of something is better than a lot of nothing,'' he said.
The Gunns share price doubled to 25 cents after the announcement before closing at 17 cents.
Industry analyst Robert Eastment predicted a joint venture partner for the pulp mill was now most likely to be found in Asia.
``Europe is pretty well a closed shop. (Mr Chandler) is based in Asia, he's got very significant contacts there,'' Mr Eastment said.
He warned political parties to work together to support the project, warning other investors will be put off if it fails.
``The name of Tasmania has been trashed enough,'' he said.
An extraordinary general meeting will be held in April to get shareholder approval, before the rights issue proceeds in May.
Any announcement about a joint venture partner for the pulp mill is likely to be subject to the success of the rights issue.
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