Stock takes: Working holiday

Investors will be hoping for an update on Stephen Tindall's plans to take The Warehouse private after he arrived back in New Zealand from Europe on Wednesday.

Tindall was said to have been due back last weekend, but is thought to have delayed his return. We suspect he wasn't in London only for the night life.

There is some speculation that he may have met British supermarket operators Tesco and Sainsburys. It would certainly make sense for him to check out all his options before heading back into the thick of it.

The battle for control of the Red Sheds has been locked in a stalemate since Woolworths completed its raid for a 10 per cent stake late last month. It could be that another party is needed to get things moving again.

And did Tindall fly back through Australia? He is by all accounts overdue for a face-to-face chat with the good chaps at Woolworths. They've had the invitation out for some time.

Meanwhile, keen market observers say his absence is unlikely to have hindered further talks between PEP and Foodstuffs.

Warehouse shares closed up 7c yesterday at $6.57 - could it be there is some expectation in the market? But even if nothing happens for a few more days don't expect to see the price drift back in a hurry. Institutions that sold to Foodstuffs' original $5-a-share bid in July are still kicking themselves and aren't about to miss out on the gains this time around.

Aussie battlers

For a good example of how aggressive Woolies can be when it comes to takeovers, it is worth looking at its 2004 move on pub and bottle store group Australian Leisure and Hospitality.

Woolworths - in partnership with gambling magnate Bruce Mathieson - started buying ALH shares in June 2004 on market, paying about A$2.60 each. It made a bid for the company a month later offering A$2.75 - but the record shows it had a lot more up its sleeve.

The ALH board rejected the A$2.75 offer but in September a private equity firm offered A$3.05. Woolworths upped its bid to A$3.15 a couple of days later. In October, Coles Myer piled in and in conjunction with Macquarie Bank, offered A$3.35 a share. Woolies went to A$3.50. Coles went to A$3.75 but wouldn't go a cent higher - leaving Woolies to bag its prey at A$3.76.

Another good way to put things in perspective is to take a look at the relative market capitalisation of the two W's. The Warehouse: $2 billion. Woolworths Australia: $28.7 billion. Woolworths can afford to win this one if it decides it really wants it.

Merger moves

Last week, Stock Takes had some fun with the popular theory that payment solutions companies Cadmus and Provenco might be ideal for a merger. One reader, who describes himself as a "somewhat cynical investor", was not so enamoured with the idea.

The Securities Commission charged Provenco with insider trading in 2004, he recalls.

Meanwhile, Cadmus makes a big deal about integrity and honesty in this year's annual report.

"We pride ourselves on maintaining the highest ethical standards and codes of conduct ... ".

Well for the record, Provenco chairman David Wolfenden, director, Nicholas Gordon, and former managing director Tony Bradley were charged with insider trading in December 2004. They settled out of court last October.

The charges related to three periods of trading in Provenco shares between February and March 2003.

Provenco paid the commission $300,000, Bradley paid $150,000, Gordon $130,000 and Wolfenden $42,000 as compensation, penalties and a contribution to the commission's costs.

Provenco does have something of a colourful past - dating back to its high-flying days as Advantage Group.

But how long would any modern relationship last if we were to let a "past" cloud our first impressions?

Provenco shares closed down 2c at 94c yesterday. Cadmus closed unchanged at 22c.

Pluses and minuses

Volume on Plus SMS shares went through the roof again yesterday. Why? Who knows. The stock is still bouncing around - although to a lesser extent than the roller coaster ride of the past few months.

Presumably some traders are making money off that volatility but that would suggest there are also some serious buyers. Go figure.

Plus SMS shares closed up 15 per cent (OK - that's only 1.5c) at 11.5c.

In fashion

Fashion management group Pod is suddenly looking quite stylish. The price of shares in the company has risen nearly 30 per cent this month - from 44c to yesterday's close at 60c.

In a previous life, Pod was Designer Textiles (also NZX listed). It shed that skin in 2004 to expand its scope. It now has three operating divisions - Designer Textiles International, which makes fabrics including fine merino wool fabrics, Michelle Ann, which designs garments for retail chains (including Farmers, Glassons and EziBuy), and Mollers Homewares.

The transition hasn't been easy and last year was a bit of a shocker - it included a profit downgrade and the departure of the managing director.

This year's annual report, issued on September 28, may have been a catalyst for the rebound as it outlined the plans of new chief executive Malcolm Walkinshaw to further develop Designer Textiles in the growing merino market and address operational issues at Michelle Ann.

The company also has $3.5 million worth of tax imputation credits and said yesterday that it would distribute those to shareholders as a bonus share issue.

Fundsource awards

The growth of the "industry awards" industry has been so dramatic in the past couple of years that it can't be long before some idiot holds an awards ceremony to honour companies that run awards ceremonies.

But to be fair, the Fundsource Managed Funds Industry Awards have done their time, dating back 15 years. So here goes ... the 2006 Fund Manager of the Year is: ING (NZ). ING, which was runner-up in the 2005 Awards, also manages the National Bank and ANZ's managed fund products and as such is the largest manager of retail managed funds with $4.63 billion in assets under management as at September 2006.

AXA and Tower came in second and third.

Check out www.fundsource.co.nzfor more details.

Wellington airport flies into flak over raising landing charges

When a company puts up its prices and then tells the market that the rise is "moderate and responsible", it's hard not to be suspicious.

Wellington Airport's plan to raise landing charges by 3 per cent a year for the next five years certainly riled Air New Zealand, which called the increase "extremely disappointing".

With no love lost between Air NZ and Wellington Airport owners Infratil, the tit-for-tat was almost inevitable. The airport even followed up with another release rebuffing Air NZ's complaints.

But Infratil gets the last laugh on this one, based on the independent view taken by Matt Henry at Goldman Sachs JBWere. Given the risk that overcharging could provoke a regulatory change, Wellington Airport has been "pragmatic" and "politically astute", he suggests. The price hikes would seem to be at a level below that which would provoke an adverse public reaction. "We assume the same could not be said for the Auckland International Airport proposal, given its strong resistance to the public disclosure of its offer."

The Wellington pricing also seems to be reasonable when benchmarked against its Australasian peers, although Henry notes there is a range of pricing analyses which can provide different conclusions on that to suit the provider's point of view.

If the proposal becomes a reality then it would represent a 15 cent per share upside for Infratil. Henry has also factored a valuation increase for TrustPower (in which Infratil holds 35 per cent) into his new Infratil valuation of $4.46 a share. The shares closed last night at $4.32, up 12c.

Questions in the air

Infratil has been in the news a lot lately. In the past couple of days it has become clear that is making progress on plans for a second Auckland airport - based at the old Whenuapai airforce base in the northwest.

North Shore City Council and Rodney District Council have agreed to join Waitakere City and Infratil to form a new company called Auckland Central Airport Ltd, which will progress plans.

However, Infratil's Prestwick Airport near Glasgow copped some less favourable publicity this week. The UK's Guardian newspaper ran a report exposing the CIA's clandestine "torture flights" - in which it would sneak terror suspects out of Britain to locations where they were tortured.

The report quotes a former CIA pilot who said Prestwick Airport was a popular destination for refuelling stops and layovers.

"It's an 'ask-no-questions' type of place and you don't need to give them any advance warning you're coming," the pilot said.