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Chandler Ups Sino-Forest Stake to Become Largest Shareholder

Billionaire Richard Chandler raised his stake in Sino-Forest Corp., the Chinese tree-farm operator targeted by short seller Carson Block, to become the company’s largest shareholder.

Chandler’s Mandolin Fund Pte acquired 5.33 million shares of Sino-Forest, which Block accuses of overstating its timberland holdings, on July 26, increasing its holding to 36.8 million shares, or 15 percent, Chandler said yesterday in a statement. Mandolin paid an average of about C$7.36 ($7.75) a share on the Toronto Stock Exchange, according to the statement. Sino-Forest rose 8 percent in Toronto trading.

“Sino-Forest represents an excellent deep-value investment opportunity,” Richard Barton, an external spokesman for Chandler in Hong Kong, said in an e-mailed response to questions.

Chandler’s purchases push the investor ahead of Davis Selected Advisers LP and Wellington Management Co. to become Sino-Forest’s largest shareholder, according to the most recent filings compiled by Bloomberg.

Chandler became one of New Zealand’s richest men partly by pushing for reforms at South Korea’s SK Group. He helped spearhead a two-year campaign against SK’s chairman on grounds his fraud conviction made him unfit to run Korea’s largest oil refiner. By the time Chandler and his brother sold their SK stake in 2005, shares of the company had jumped fivefold.

Independent Probe

Chandler said July 20 that Mandolin increased its stake in Sino-Forest to 26.7 million shares.

Sino-Forest rose yesterday for a seventh consecutive session, gaining 57 cents to C$7.69 in Toronto.

The shares plunged 83 percent last month. Block’s Muddy Waters LLC published a report June 2 alleging Sino-Forest overstated its timber holdings in China. Sino-Forest, based in Hong Kong and Mississauga, Ontario, has denied the Muddy Waters allegations and commissioned an independent investigation into the claims.

China’s reputation among investors has been strained in recent months after short sellers said companies from Longtop Financial Technologies Ltd. to Sino-Forest were exaggerating operations.

John Paulson’s $37 billion hedge fund, that had been Sino-Forest’s largest shareholder, sold its entire stake last month. The fund, Paulson & co, had lost C$462 million ($487 million) since May 31 on Sino-Forest, it said in a letter to clients.

Sino-Forest accounted for 2.5 percentage points of the 11 percent decline in the firm’s biggest fund in June, John Paulson, 55, said on a conference call with investors on July 22, according to two people briefed on the matter.

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