Takeover wave breaks as new act approaches

Friday 11th May 2001

By Nick Stride

Takeover activity among listed companies is intensifying in the run-up to the July 1 enactment of the Takeovers Code.

This week alone Alliant International and Utilico moved to break an ownership impasse at TrustPower, SK Foods wrapped up its purchase of a controlling stake in Cedenco, and France's Schneider stood in the market to tighten its grip on PDL Holdings.

The action brings to eight the number of companies in which control has changed in recent weeks.

Control of PDL remains in the hands of the Stewart family but it is believed Schneider is negotiating to buy the 60% stake.

Alliant and Utilico on Wednesday announced an on-market bid to lift their combined holding in TrustPower to 38.6%.

Adding the 25.8% stake held by Utilico's sister company Infratil the group will control 65%.

The future of a market minnow, Pure New Zealand, hangs in doubt.

Australian mystery bidder Bomax Pty on April 5 gave notice it intended to buy a 34% stake from Jamina Holdings and top-up on-market to 51%. It has not been heard of since.

Control has also been acquired, or changed hands, at five other listed companies:

INL announced on May 7 that it would buy Todd Corporation's 11% Sky Network Television holding and bid on-market for a further 6.25%, taking its stake to 66.25%;
Edison Mission Energy has filed a notice to lift its holding in Contact Energy from 41.6% to 50.1%;
Control of Shotover Jet has passed from Jim Boult's Armada to Ngai Tahu Holdings;
Brierley Investments sold its 66% stake in Tasman Agriculture to Dairy Holdings, which on-sold 22% to Southern Capital; and
Lion Nathan in February seized control of winemaker Montana in an overnight raid.

Takeover law specialist Cathie Quinn, a partner at Rudd Watts & Stone, said all of these cases would be captured by the Takeovers Code if it was already law.

Of course it was debatable in some cases whether the transactions had specifically been undertaken in anticipation of the code becoming law, Ms Quinn said.

The code stipulates anyone passing the 20% ownership level in a listed company must offer the same price to all other shareholders.

That can be either by way of a bid for 100% of the shares, or by a pro rata (the same percentage of each holding) offer to all shareholders to secure less than 100%.

Where a holder owns 20-50% of a company the offer must take the buyer to at least 50.1%.

Ms Quinn said the effect of the code was that minorities would effectively share in any premium for control that would otherwise have been paid by the buyer to a controlling or strategic shareholder.

The economic effect - whether bidders would pay more or less to get control - was uncertain.

"They'll still need to make their bid attractive enough to persuade major players to sell their stakes," Ms Quinn said.

In five of the nine recent cases - Montana, Sky TV, Pure, Contact, and TrustPower - the buyers made general, on-market bids that gave minority shareholders the chance to participate.

But under the code those offers would have to be have been pro rata.

In the cases of Tasman Agriculture, Shotover, and Cedenco, stakes of more than 20% changed hands.

Under the code a general offer would have to have been made at the same price.

At PDL, Schneider simply passed the 20% threshold by buying on-market. It would have had to make a general offer at 20%.

Arthur Lim, an analyst at sharebroker JP Morgan, said the code mainly affected the 20% to 50% range, making holdings of that size more difficult to sell. So most of the pre-code activity could be expected within that range.

"Some of the activity we've seen certainly falls into that area. But it's more a question of the ease or flexibility of doing it. They can do it now on-market without the hassles of pro rata."

One recent takeover that would not have been affected by the code is Sky City's acquisition of Peter Francis' controlling stake in Force Corporation.

Sky City paid 25c for Mr Francis' Force shares but offered the same price to all other shareholders for all their shares. None took up the offer.

Although the most likely pre-code transactions have already been done or announced, a number of companies still have shareholders in the 20%-50% "target range:"

Infratil has 24.7% of Port of Tauranga;
Bell Atlantic has 24.9% of Telecom;
Auckland City Council has 25.7% of Auckland International Airport; and
Brierley Investments has 30% of Air New Zealand.

Among larger stakes are International Paper's 50.1% of Carter Holt Harvey, BHP's 50.7% of Steel & Tube Holdings, AGL's 74% of Natural Gas Corporation, and Infrastructure Auckland's 80% of Ports of Auckland.

Activity is also possible among unlisted companies. The code covers any company with 50 or more shareholders and assets of $20 million.

O'Brien column

Comments from our readers

No comments yet