Maverick tries to raise $90 million

By Duncan Bridgeman

Friday 5th March 2004

Corporate maverick Jim Scott is fast regaining high-flyer status with his Napier-based investment company Aquiline Holdings embarking on a $90 million capital raising.

The former Air New Zealand chief executive has little faith in the established capital markets when it comes to his company's shares, so investors have to invest on Aquiline's own share register.

The company is preparing a prospectus detailing an offer of 80 million convertible preference shares (CPS) at $1 a share. A further 10 million redeemable preference shares (RPS) at $1 will be issued.

The company already has 217 shareholders mostly family, friends and acquaintances but is looking for a wider mix of investors to improve liquidity and fund acquisitions.

Instead of the market setting the share price, Aquiline's directors do it themselves.

On the board are Mr Scott's successor at Air New Zealand, Jim McCrea, businessman Graham Cowley and Aquiline managing director David Oldershaw.

Since July 2001, when the shares were set at $1.75, the directors have bumped the price up to $17.78.

Isn't that a bit unusual?

"No ... The company has made an awful lot of money and the share price has gone up accordingly," Mr Scott said.

"We are doing it our way but we believe that providing the board sets a price that is realistic then we should be able to raise that extra capital. We are strongly opposed to listing because there are so many market players out there that cause a distraction."

Since leaving the national airline amid controversy in the early 1990s, Mr Scott, previously a senior executive at Carter Holt Harvey, has built Aquiline through acquisition.

The company has acquired 14 small businesses since its launch nine years ago, which Mr Scott said generated $200 million turnover last financial year.

The acquisitions are all import and distribution companies handling "essential products" such as industrial chemicals and textiles. Its biggest move lately is into the food industry with the purchase of Auckland food ingredient importer Marsanta Foods.

Mr Scott said the company was looking to attract investors ranging from high net worth individuals, investment companies and your average punter.

"We haven't raised capital for quite a while so it gives us the opportunity to build up our equity ... then we will look at issuing capital notes or bonds."

The CPSes carry a 6% imputed dividend until they convert to ordinary shares at a designated price. They automatically convert through either exiting shareholders selling down or Aquiline issuing new ordinary shares.

Conversions will most likely occur within 12 months or compulsorily within two years of issue.

"Whatever the price they convert at, we are confident of getting more than 25% shareholder return per year," Mr Scott said. That's profits plus share-price appreciation.

The RPSes carry a 7% dividend paid three times a year. These shares will be redeemable on June 30, 2007.

Mr Scott said he did not know what that price would be but estimated it would give a P/E ratio of 15-20.

The directors sit down in July to reassess the share price.

Once investment statements and applications have been signed, settlement dates will be set at regular intervals.

The company is looking to expand its textile business where it sees greater opportunities in sailmaking, footwear and furniture.

Aquiline recorded an after tax net profit of $4 million for the six months to December 31, the company's website shows.

Mr Scott said the company was looking to snare at least 25 businesses in the next couple of years. "I think we will make an impact but we won't be too disappointed if we don't fill the offer."

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