Brakes put on Vehicle Testing Group IPO

Stephen Matthews

Plans for a partial sharemarket float of the Motor Trade Association's Vehicle Testing Group (VTG) have been brought to a standstill by uncertainty over new rules for testing heavy vehicles' brakes and slowing imports of used cars.

The Motor Trade Association (MTA) had intended to float about half of VTG to free up some of the $50 million to $100 million in capital it has tied up in the business. However, those plans have been put on hold, probably until the new year.

"Changes to the heavy brake testing rule may require significant capital investment in new testing equipment," the MTA said yesterday.

"Until the new testing regime is confirmed by Land Transport New Zealand we won't have a clear view of what that means for the business."

That was expected to take "a few months".

Meanwhile the recent decline in the number of used cars being imported had also affected VTG's business.

MTA chief executive Stephen Matthews said used car imports had fallen from about 170,000 a year to about 120,000.

However the MTA remained committed to the initial public offer at some point in the future.

"Once the implications of the heavy brake rule change are known and the used car import market stabilises, the board will be in a better position to reconsider the offer."

Matthews said there had been "extremely good demand expressed" by potential investors for shares in VTG.

"Obviously we're going to let some people down in the short term, hopefully they'll stick by us for the new year."

One fund manager said although there had been little detail on the offer available, investors had been "quite keen" on it.

"Conceptually it sounded like a worthwhile company to have a look at but it comes down to price," said the fund manager.

The association's 4000 members, who agreed to the IPO in April, would have probably got preferential rights to the shares in the float, which would have been used to strengthen the MTA's balance sheet.

VTG - the market leader in warrant of fitness testing, imported used car certification and heavy vehicle testing - operates through 60 Vehicle Testing New Zealand (VTNZ) and On-Road branded stations.

MTA acquired the former state-owned enterprise for $19.2 million in 1999 when vehicle testing was privatised. It later bought rival On-Road New Zealand.