UnitedNetworks directors today recommended to shareholders that neighbouring Vector buy the assets of the $NZ2.3 billion Auckland-headquartered utility. The directors also recommended a simultaneous divestment by Vector of the eastern region electricity network to Powerco and Hawke's Bay Network for $785 million, plus the central North Island gas networks to Powerco for $220 million.
UnitedNetworks' independent director Mike Smith said Vector's price, at $NZ9.90 per share, was assessed as fair and reasonable and in the best interests of all shareholders. It valued UnitedNetworks at $NZ1.5 billion.
Majority owner Aquila has agreed to accept the Vector offer for its 70.2% UnitedNetworks stake and has said it will not talk to third parties for 150 days, effectively closing the door on alternative and perhaps higher bids by such companies as Hong Kong's Cheung Kong Infrastructure Holdings and Singapore Electric.
Vector has agreed to bid for all UnitedNetworks shares within 30 days, subject only to its agreement with Aquila becoming unconditional.
Powerco will become New Zealand's largest gas distribution company and second largest electricity distribution company after the UnitedNetworks acquisitions, which will double the size of its network and give it gross assets of about $NZ1.7 billion and approximately 391,000 consumer connections.
Earlier this week EnergyReview.Net predicted a sale to Vector was likely, with a partial sell-down to New Plymouth-headquartered Powerco.
UnitedNetworks said its decision to recommend the bid was the culmination of a competitive bidding process conducted by the company to sell all of the shares or assets to one or more successful bidders. Vector, formally Mercury Energy, is owned by the Auckland Energy Consumer Trust.
Commentators said Vector was a natural buyer for the neighbouring UnitedNetworks electricity lines on the North Shore and the Waitemata areas of Auckland. Vector, which had been number one until UnitedNetworks' recent expansions, would again be reasserting its dominance and would pick of some great high density, high growth areas. Powerco had also picked up some lovely assets, Tauranga and Rotorua.
Powerco chief executive Steven Boulton said the acquisition would increase his company's scale and geographic diversification and improve the mix of provincial and urban networks. Powerco's electricity distribution networks would spread throughout the Coromandel, Thames, Eastern Waikato and Tauranga regions; and its gas networks would extend into Hawke's Bay, Manawatu and Wellington.
Powerco would raise up to $NZ150 million in equity to help fund the $NZ810 million purchase.
Hawke's Bay Network chief executive Ken Sutherland promised his company's agreement to buy the Taupo and Rotorua regional electricity network assets of UnitedNetworks would give long-term benefits to both shareholder consumers of HBN and the consumers of Taupo and Rotorua. He said HBN had been looking for expansion opportunities for some time, and was delighted to have acquired its neighbouring lines networks which would jointly form "a strong critical mass in the central North Island".
UnitedNetworks' shares continued to power ahead after the announcement, hitting a record high of $NZ9.65 then easing to $NZ9.55.
United Network's share price has risen over 25% since June 10, as buyers speculate a strong takeover price would be offered after American energy company Aquila (formerly the Missouri-based Utilicorp), which owns 70.2% of UnitedNetworks, aid it wanted to sell its Australasian assets to reduce its debt and please international ratings agencies.
