However, company chairman Michael Stiassny and chief executive Mark Franklin appear unfazed by the possibility that vast numbers of NGC’s estimated 15,000 minority shareholders will reject the offer as it currently stands.
On a number of occasions Stiassny and Franklin have publicly said they are comfortable with holding only Australia Gas Light’s 66.05% stake in NGC, the purchase of which Vector completed at NZ$2.91 per share in mid-December.
They have said a full takeover would allow the merger of the two companies, creating some synergies, and that a total acquisition of NGC’s “complementary assets” would allow Vector to fully move upstream into the business of gas trading, transmission and distribution.
They have previously announced ABN Amro Rothschild would be providing equity bridge financing for any complete takeover bid, with the rest coming from bank borrowings, and have also said Vector could float up to a quarter of the company within a year to pay back ABN Amro Rothschild.
However, as the deadline approaches both have declined to talk further about the offer until it has closed.
Commentators see several similarities between Aussie listed company Origin Energy last year buying Edison Mission Energy’s controlling stake in Contact Energy and the Vector-AGL-NGC process.
Both takeover companies are impressed with the buoyant kiwi energy sector and see it continuing for several years at least until New Zealand enters its post-Maui age in 2009.
Both Origin and Vector are also content with less than 100% ownership of their new companies provided they hold controlling stakes and have their own personnel in key positions.
Origin has installed its boss Grant King as Contact chairman, and commercial executive director Bruce Beeran and wholesale and trading executive manager Karen Moses to the Contact board.
Vector has installed its former group sales and marketing manager Bryan Crawford at the helm of NGC, with AGL secondee Phil James returning to Australia at the end of February.
Both Contact Energy and NGC are well-performing New Zealand sharemarket heavyweights, with good share price performance and dividend returns. Contact’s total dividends for the September 2004 year were 25 cents fully imputed, from a net surplus of NZ$144 million, while NGC’s earnings increased by 22% to NZ$81.8 million and it paid out 10.5 in fully imputed dividends.
Vector has had to overcome setbacks in its quest for NGC, however.
The Takeovers Panel twice knocked back Vector’s bid for NGC. It first refused Vector to buy Australia Gas Light’s New Zealand holding company that owned the majority stake in NGC, though that is what Origin did a few months earlier when it purchased EME’s controlling stake in Contact. The panel then declined an application allowing Vector to give NGC shareholders preferential entitlement in its planned IPO later this year.
Vector last November successfully directly purchased AGL’s 66.05% stake in NGC and its offer to other shareholders closes Friday.
The Grant Samuel independent appraisal concluded the Vector offer was fair, though it said the offer was not by itself a sufficiently compelling reason to accept and that shareholders could realise a higher price by selling on-market. There were only limited alternatives available for reinvesting in the New Zealand energy infrastructure sector.
Vector may make a second, sweeter offer to secure the last 33% of NGC shares or offer minority shareholders a swap of Vector shares for NGC shares at the IPO later this year.
A total takeover of NGC will create a company with over NZ$4 billion of assets and NZ$1 billion of revenue, with electricity networks in Auckland and Wellington and gas pipeline networks in several regions of the North Island.
The community trust which actually owns Vector has recently shown it means business by appointing three business heavyweights – Guinness Peat Group New Zealand boss Tony Gibbs, former Auckland International Airport chief executive John Goulter and former boss of The Warehouse Greg Muir - as trustees to help the trust oversee Vector’s growth plans.
