Fletchers

"It was all a matter of opinion. Since few forests were sold in New Zealand there was no real market for them, so it was all about academic theory of what discount rate to use. This hinged on assumptions about future prices. Fletchers were masters at arguing for a low discount rate, which gave them high valuations for their forests. When inflation was running at 18 per cent, they were discounting at 6 per cent, which I thought was bullshit; but it allowed them to generate profits by revaluing their forests upward each year. Treasury played this low discount rate game, with their consultant coming up with the theory that the world was running out of trees, justifying high valuations. But the reality is that the world is smothered in forests and there’s no shortage of pulp timber; it grows like weed. Time has proven we were right; they thought the forests were worth $5 billion and we offered them $2 billion. I’d be surprised if they were worth that 20 years later. They had no great value; there was a doubling of supply coming up; they were planted without rhyme or reason, with no proven market and heaps of competition. The whole exercise had been crazy."

"*Alan didn’t have a high opinion of professional directors, but my sense is that he would have tackled Fletchers because he believed it was on the wrong track and it was his duty as a New Zealander to respond if asked. At the same time he was getting stuck into producer boards, calling for deregulation and reforms, so he never shied away from the big issues. It would have been a fascinating moment in New Zealand corporate history if he’d joined Fletchers, explosive even. He would have bitten hard and sought to re-orientate the company towards the interests of its shareholders. He’d thought very deeply about the nature of capitalism, about the rights of shareholders, the purpose of a company, in an intellectual way that was so unusual in New Zealand, and diametrically opposed to Hugh Fletcher’s view of the world and the pervading culture at Fletchers. Gibbs’ arrival would have been a takeover, in effect. The divisional heads would have had an entirely new experience, and it certainly would have been the end of Hugh.*[31](private://read/01jrsfvkjy84rkprtbz9amfvj8/#rw-num-note-477309-807254973-31)"

"[31](private://read/01jrsfvkjy84rkprtbz9amfvj8/#rw-ref-note-477309-807254973-31). Goldsmith, *Fletchers*, pp. 281–2."