Former NGC chief executive Richard Bentley, Rick Bettle and former Labour Cabinet minister Fran Wilde are recommending shareholders accept the NZ$2.91 per share offer - as AGL has done for its 66.05% NGC stake - but say there are some key issues that need considering.
Their recommendations are contained in NGC’s target company statement (TCS) released today, together with Grant Samuel & Associates’ independent report. Bentley and Bettle own NGC shares and say they intend accepting Vector’s offer.
Grant Samuel assessed the underlying value of NGC shares to be NZ$2.50-2.76 and, as the Vector offer exceeded this, concluded the offer was fair.
However, Grant Samuel said the offer was not on its own a sufficiently compelling reason to accept. Shareholders could realise a higher price by selling on the NZX and there were only limited alternatives available for reinvesting in the New Zealand energy infrastructure sector.
The independent directors said shareholders should read the TCS and Grant Samuel report carefully and, if in doubt, seek further guidance from their financial or legal adviser.
As NGC’s current share price was above the offer price, shareholders considering accepting the Vector offer should also think about selling their shares on the market, provided the price they received, after transaction costs, was higher than NZ$2.91, the directors advised. However, there was no guarantee NGC shares would continue to trade at current levels following the completion of the offer.
Grant Samuel - while acknowledging that NGC’s growth prospects in gas processing, LPG and metering were reflected in the current share price, along with the change in controlling shareholder - also said NGC’s shares might trade at prices below the offer price under current market conditions.
NGC’s 9.7% dividend yield, based on the offer price and the 2004 financial year dividend payout, was among the highest of any of the top 20 New Zealand listed companies. Following the Prime Infrastructure takeover of Powerco, NGC was now the only significant listed energy infrastructure company.
"NGC’s cash flows and dividend payments currently benefit from access to low cost Maui gas. This access will fall significantly from 2006 with an adverse impact on NGC’s future cash flows and dividend payments," said the TCS.
Although Vector had announced its intention to list up to 24.9% of its enlarged capital within the next year, there were no guarantees Vector would so, or that NGC’s shareholders would be able to access such shares, the TCS said.
Vector had also indicated that a number of investor classes, such as Vector’s income beneficiaries, would be offered priority entitlements.
The independent directors considered it highly unlikely shareholders would receive a higher or alternative offer for their NGC shares while the current offer was open. However, Vector could make a subsequent offer on different terms if it did not reach the compulsory acquisition threshold of 90% of NGC shares.
"A listing will enable Vector to offer scrip to NGC shareholders should it make a subsequent offer. This would potentially benefit NGC shareholders, but there can be no certainty that Vector will make such an offer,” the TCS added.
