Marlborough Lines hits back at Horizon directors' rejection

Tuesday 13th October 2009

Network company Horizon Ltd's directors are rejecting a takeover offer from Marlborough Lines Ltd with inflated projections of future earnings, Marlborough Lines chief executive Ken Forrest said in a statement this evening.

“In recommending against acceptance of our offer, the Directors have indicated that they expect to deliver increased profits to shareholders to an extent they have been unable to do previously.

"Marlborough Lines believes that Horizon’s Directors will be unable to deliver on their newfound profit and value expectations,” said Marlborough Lines chief executive Ken Forrest.

Horizon's board said the ML offer of $3.96 a share lay "at the bottom of the valuation range determined by the Independent Adviser" of $3.96 to $4.68.

Forrest questioned "how the independent valuation commissioned by Horizon has arrived at its figures. The company’s disclosures to the market up until our offer was notified do not support that valuation range.”

"Horizon shareholders should seriously question the Horizon Directors’ recommendation today and seek their own independent advice about the merits of Marlborough Lines’ partial takeover offer," he said.

Horizon is 77% owned by the Eastern Bay of Plenty Energy Trust and listed on the NZX. Trust election results announced on October 2 saw a complete turnover in the membership of the board of trustees.

The share was unchanged at $3.40 after trading today. Its directors recommend that if the Trust decides to sell its stake, minority shareholders should take up the offer also, or risk illiquidity and share price under-perfomance.

“Given our offer represents a 34% premium over the last trading price of Horizon shares before the offer was notified, we continue to believe our offer is an attractive proposition for shareholders as a unique opportunity to realise a substantial premium on their investment,” said Mr Forrest.

The day before the offer, Horizon had issued an updated profit forecast raising profit expectations this year from $4.5 million to $6 million, thanks to one-off factors including a cold winter, and was unlikely to prove sustainable.

"Our view is that given that there have been no fundamental changes to the Company, its historical share price and past performance provide a more appropriate indication of its value and likely profitability.”

Horizons is one of 28 electricity network companies operating regulated regional electricity line monopolies. The sector has been subject to consolidation plays over the decade since they were divested of retail electricity customer bases.

ML has 50% holdings in the OtagoNet and Nelson networks.

Coincidentally, an updated valuation for Powerco, a larger lines business 42% owned by the troubled Australian firm Babcock and Brown Infrastructure, said New Zealand network companies transactions were occurring at a premium of 9 times forecast EBITDA compared to trading multiples of 7.8 times (for Vector).

Businesswire.co.nz

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