MARKET CLOSE: NZ shares drop; Spark falls, SkyTV gains on Vodafone merger plan

Thursday 9th June 2016

New Zealand shares fell on concern Spark New Zealand would face a stronger rival should Sky Network Television, the biggest gainer on the day, conclude its merger plan with Vodafone New Zealand.

The S&P/NZX 50 Index dropped 20.96 points, or 0.3 percent, to 6,970.55. Within the index, 28 stocks fell, 16 rose and six were unchanged. Turnover was $254 million.

Sky TV soared 17.5 percent to $5.25 after announcing it will merge with the New Zealand unit of Vodafone Group to create the country's largest telecommunications and media group following a capital review by Citigroup.

Auckland-based Sky wants to acquire all the shares in Vodafone NZ for $3.44 billion through the issue of new shares, giving Vodafone Europe a 51 percent share in the combined group, and cash of $1.25 billion, to be funded through new debt, the companies said .

"There have been rumours swirling for a while about what would come out of the review," said David Price, a broker at Forsyth Barr. "We like the deal, the way it's structured, and you've seen the market's reaction which cements that view."

Spark fell 5 percent to $3.31, a three-month low.

"Subject to getting all the approvals, Spark is going to have quite a formidable competitor - a well-resourced, big competitor," Price said. "I think as a subscriber to the new entity, they'll give you access to things Spark won't be able to access. Say you're a Hurricanes fan, they may give you the ability to watch the Hurricanes game on SkyGo with no data usage. Sky has bought up a lot of mobile rights - sports, HBO, for the next five years - so they've got a lot of time to hone their offering and make it more difficult for Spark."

Westpac Banking Corp fell 2.8 percent to $31.57 and Australia & New Zealand Banking Group dropped 2.5 percent to $25.60. The banks have imposed new restrictions on overseas property buyers.

In a statement, Westpac said it would no longer lend to non-resident borrowers with overseas income, while the maximum allowed loan to value ratio for New Zealand citizens and permanent residents with overseas income would be reduced to 70 percent from 85 percent.

ANZ is also overhauling its home loan policies for applications that rely on overseas income, applying a maximum loan to value ratio of 70 percent and no lending on investment properties. No interest-only mortgages will be issued and boarder income won't be taken on board.

Coats Group dropped 5.8 percent to 57 cents, Tower fell 3.9 percent to $1.47 and Orion Health Group shed 3.7 percent to $4.90.

A2 Milk fell 2.7 percent to $1.47, having gained 7.9 percent yesterday in continued volatile trading.

Steel & Tube Holdings gained 2.6 percent to $1.99.

Kathmandu Holdings rose 1.4 percent to $1.48. The outdoor clothing chain fell 2.7 percent yesterday after announcing it was suing its biggest shareholder, Briscoe Group, in an effort to recoup what it spent fending off the rival retailer's failed takeover attempt.The Christchurch-based outdoor equipment chain filed a claim in the High Court to claw back $2.7 million and A$446,000 of expenses racked up when it fended off Briscoe's hostile takeover, it said.

BusinessDesk.co.nz

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