winstone pulp

Winstone Pulp.

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In 1976 Winstone Ltd took a majority shareholding in a joint venture with the Chonju Paper Manufacturing Company of Seoul to establish and operate a thermo-mechanical pulp mill adjacent to the Karioi State Forest, sited between Ohakune and Waiouru. The move appeared a sound strategic initiative into an emerging industry with positive returns, but it was an area outside of the core competencies of the building products and construction industry firm. Winstone's equity partner in the project was a subsidiary of the Samsung Group, which was the largest business in the Republic of Korea. It agreed to take at least 70 per cent of the mill's total output for the first five years of production.

However, by the time the new Karioi pulp mill, operated by Winstone Samsung Industries Ltd, came on stream in 1979, international prices for pulp and newspaper had became significantly cheaper. Consequently, Winstone's joint-venture partner decided to renege on its earlier agreement to take the mill's pulp production. That left Winstone Samsung with an enormous dilemma - it was producing pulp for which it had no customers, and because it had believed it had a guaranteed customer for most of its production, it had no sales or marketing force in place. In addition, there were quality-control issues about the pulp produced. The problems this situation caused took many years to overcome, and the mill, which had required a substantial amount of capital to build, continued to be a significant drain on Winstone Ltd's resources for the next decade.

In 1979, the same year Winstone Ltd's pulp mill came into production, its major competitor, Fletcher Holdings Ltd, along with the Challenge Corporation, bought the government's 34 per cent share holding in Tasman Pulp and Paper. This left Fletcher owning 56.46 per cent and Challenge Corp 28.23 per cent of the big forestry company. The next year, the three companies were merged to form Fletcher Challenge, the biggest business conglomerate ever created in New Zealand.

The Karioi situation considerably weakened Winstone Ltd, and in order to meet its term debts it required assistance of $15 million from the government (in the form of $10 million in preference shares and a $5 million loan), assistance that was intended to rescue the Karioi mill from almost certain closure and was officially described as 'participating in a restructuring' of Winstone Samsung.

In 1981, mill losses amounted to $7,133,000 (Winstone's non-pulp activities produced a $10.6 million profit and it held 60 per cent of the booming home improvements market); two years later mill losses had risen to $11 million. In late 1981 the private Christchurch-based investment company H.W. Smith Ltd, whose directors were closely associated with Brierley Investments Ltd, made an offer to shareholders in an attempt to increase its 10 per cent holding in Winstone Ltd to 24.9 per cent.

To turn the ships and their cargoes around quickly, Auckland's container port began operating at night-time and over weekends. The mechanised cargo handling required a much smaller work force, most of whom operated machinery, as work in and around the port became increasing capital intensive. It was the start of a change, which would progressively dominate the strategy and activity of the port, dictating an ever-increasing focus toward supply-chain optimisation.

In 1981, mill losses amounted to $7,133,000 (Winstone's non-pulp activities produced a $10.6 million profit and it held 60 per cent of the booming home improvements market); two years later mill losses had risen to $11 million. In late 1981 the private Christchurch-based investment company H.W. Smith Ltd, whose directors were closely associated with Brierley Investments Ltd, made an offer to shareholders in an attempt to increase its 10 per cent holding in Winstone Ltd to 24.9 per cent.

By 1983, H.W. Smith held 27 per cent of the Winstone shares and was represented on the board by Bruce Judge. A year later Brierley Investments, which was established in 1961 by Ron Brierley with the purpose of acquiring substantial shareholdings in public companies in Australia and New Zealand, took over H.W. Smith's investment arm, Bunting & Co., acquiring its Winstone shares among others.

The move catapulted Brierley to third largest company in New Zealand with a market capitalisation of $811.8 million (compared with $57 million in 1981, when it was 15th largest). It soon had full control of Winstone Ltd. Three Brierley-appointed directors - Bruce Judge, Paul Collins and Bruce Hancox - sat on the board and the last remaining director from the Winstone family, Donald, retired. Winstone Ltd began operating as a subsidiary company of Brierley Investments. The century-old family empire was now completely in new hands.

In the months following the October 1987 worldwide stock market crash, Brierley was particularly vulnerable. The cash-strapped investment company had enormous debts and began an asset sales programme that soon had it dubbed Brierley Divestments Ltd by the press. In early 1988, Fletcher Challenge announced it had bought Winstone Ltd. The $444 million sale was an enormous shock to the non-Brierley directors of Winstones, who were told of it the evening before the public announcement of the purchase, when the deal was a fait accompli. Fletcher Challenge moved quickly to integrate Winstone's operations into its existing business structures. Within a few months the Karioi pulp mill was put up for sale and 30 Winstone branches had been closed.

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Brierleys takeover bid Brierleys takeover bid.

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