The independent directors – chairman (and former CEO) Richard Bentley, Rick Bettle and former Labour minister Fran Wilde – said the offer, of a NZ$2.62 Vector IPO share plus NZ$0.78 cash, was fair and reasonable.
They said that senior NGC officers who owned or controlled shares intended accepting Vector’s offer for the 32.79% of NGC it did not already own.
But they also said the NZ$3.40 amount was of limited relevance only in assessing Vector’s offer. The realisable value of Vector shares on and subsequent to listing, which might be above or below the IPO price, was of primary importance.
NGC shares were already fetching about NZ50c more on the NZSX than the Vector offer, closing at NZ$3.99 yesterday.
NGC and Vector, following its listing, would be the only significant energy network infrastructure companies listed on the NZSX. Vector would become the sole such company if it reached the 90% threshold allowing it to compulsory acquire all remaining NGC shares.
If the IPO proceeded as planned, Vector would become one of the largest NZSX-listed companies, one of a small number of reasonably-sized “defensive” stocks, and likely to attract strong institutional interest. Institutional investors and Vector bond holders have already started snapping up shares under the IPO.
The directors also yesterday released to the NZSX details of NGC’s Target Company Statement, incorporating the independent Grant Samuel & Associates report.
Grant Samuels forecast NGC dividends of NZ8.5 cents per share for September and NZ9.5 cents per share for next April, implying a gross dividend yield of around 8% at the ascribed offer price of NZ$3.40.
This compared favourably with those of other NZSX-listed companies, and with the 7.2% yield forecast by Vector for its June 2006 year.
Grant Samuels estimated there was very limited potential for any other successful competing offer, limited potential for a further scrip offer by Vector, and a low likelihood of Vector shares becoming available to the public under the IPO.
NGC estimated annual operational and cost-savings synergies of NZ$6-13 million for Vector through complete ownership of NGC, which would add approximately NZ10-20 cents to the value of NGC.
The independent directors further noted that NGC's cash flows and dividend payments currently benefited from NGC's access to low-cost Maui gas that was likely to cease by June 2009.
This would impact negatively on future cashflows from NGC's gas trading business and, potentially, future dividend payments.
Net NGC earnings projections were NZ$82 million for the June 2005 year and NZ$86.6 million for the following year.
