Daily ShareChat: NZ Refining

By Jenny Ruth

Tuesday 24th November 2009

New Zealand Refining's decision to make a bonus share issue in response to Shell's plans to sell its downstream assets, probably to an Infratil/New Zealand Superannuation Fund joint-venture, "is a prudent move .. to ensure that imputation credits are not lost to shareholders," says McDouall Stuart.

Shell owns 17% of NZR. Under New Zealand tax law, if shareholder continuity falls below 66%, imputation credits can't be carried forward.

McDouall Stuart says there is speculation that other NZR cornerstone shareholders are seeking offers for their shareholdings so it is entirely possible the 66% ownership threshhold could be breached.

"Indeed, if the Mobil holding that is also reputed to be on the market changes hands, the combined Mobil and Shell shareholding of 36.3% would breach the threshhold."

McDouall Stuart says theoretically the one-for-six bonus issue will see the NZR share price fall by 14% to account for the dilutionary effect of the extra shares.

"With all the noise going on around NZR, it will be interesting to see what actually transpires. As we have previously said however, with just 14.2% of NZR shares held on the listed market, the share price signal the market delivers will not be one that holds much sway in IFT's deliberations over Shell's 17.1% stake."

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