By Geoff Senescall
Brierley Investments is rejigging its Air New Zealand portfolio so it can package together a 25 per cent stake to offload to Singapore Airlines.
To do this Brierley intends buying a further 52 million Air New Zealand B shares, which can be held by foreigners. It plans to finance the purchase mostly through swapping the B shares for its A shares, topped up by cash.
Its move comes amid rumours that a delegation from the Singapore Government - which owns 54 per cent of the Asian airline as well as 5 per cent of Brierley - was in Auckland to hold high-level talks with Air New Zealand and Brierley officials.
But in spite of this visit it is understood that Singapore Airlines is cool on the idea of buying shares in Air New Zealand. Its primary aim is to buy 50 per cent of Ansett Australia, of which it is in the final stages of due diligence. But for that to happen, Air New Zealand - which Brierley controls through a 47 per cent holding - must waive its pre-emptive rights over the 50 per cent of Ansett it does not own.
Brierley, led by Air NZ chairman Sir Selwyn Cushing, ideally wants Singapore Airlines to give up its bid for 50 per cent of Ansett in favour of a stake in Air New Zealand
Not having a deal on the table has not stopped Brierley from positioning itself. Last week Sir Selwyn, with only the tacit agreement of Brierley's shareholders, spent $106 million to lift its Air NZ holding from 42 per cent to 47 per cent.
Brierley yesterday gave notice that it intended to increase its holding further. But the net effect of the move would be to rebalance its Air NZ holding in favour of the unrestricted B shares, which it intends increasing from around 17 per cent to 25.92 per cent, at a price between $3.30 and $4.30 a share.
This is a key number as under Air NZ's constitution, a foreign airline can hold only up to 25 per cent of the airline through its B shares.
Brierley indicated that payment for the B shares might be made through a exchange of A shares and cash. This means that Brierley would be targeting B shareholders who are New Zealand residents and can own the A shares.
It is understood that around one-fifth of the B shareholders are eligible to buy A shares in Air NZ. The A shares are valued at between $2.40 and $3.40 each.
A tactic to try to make them switch is likely to be to raise the prospect of the A and B shares being merged into one security. As is the case with the Australian listed airline Qantas, the foreign shareholding would then be monitored to insure it did not go over the 49 per cent restricted ownership level. Air NZ B shareholders would be disadvantaged by such a move as the premium over the A shares would close.
As part of its move to raise its B shareholding, Brierley also said that it would buy up to 22 million A shares, increasing its A share holding to 34.23 per cent.
Brierley is restricted on making any move for 15 working days and has put a time limit of executing the manoeuvre until September 30.
But it is unlikely that it would make any major move until after its June 30 balance date. This is to ensure that it would not blow out its balance sheet by having to consolidate Air New Zealand's debt if Brierley went above 50 per cent.
Brierley builds tempting package for Singapore
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