Baycorp listing at risk

Transplant: Baycorp has New Zealand origins but investor numbers have declined on this side of the Tasman. Picture / Bloomberg News

A drop in the number of Baycorp's Kiwi shareholders during a failed bid by Australian private equity firm Allco Equity Partners has put the firm's New Zealand sharemarket listing at risk.

Chief executive Andrew Want told the Business Herald his "strong, strong preference" was for the debt collection and credit information company to remain listed in both Australia and New Zealand.

"We would like to see our New Zealand-based shareholding rise again," he said. "But if our [New Zealand] shareholding was to reduce further or stay at these low levels, then the dual listing becomes difficult. We have to look at that pragmatically."

Want would not disclose how many New Zealand shareholders the company still has, but said the decline occurred during the failed bid for Baycorp. In August, the company had said New Zealand shareholders represented 40 per of its share register by number and 20 per cent by value.

Allco offered A$3.50 ($3.81) a share for 50 per cent of Baycorp stock in July. Despite Allco later increasing that to A$3.52 a share, the bid lapsed at the start of October without gaining traction. Australian institutions instead increased their holdings after independent expert Lonergan Edwards valued the shares between A$3.84 and A$4.23 each and Baycorp itself revealed a plan to sell or close under-performing businesses, return 50Ac a share to shareholders and buy back 5 per cent of its own capital.

But Want said New Zealand shareholders appear to have sold. He wants to persuade Kiwis to invest in the business again after the "distraction" of the Allco bid.

"I want to say to our New Zealand shareholders and followers that for the last two years we have been putting together a very detailed strategy for the group, based on information services on one hand and accelerated growth in collections on the other," he said.

The company has a long New Zealand history. The Baycorp debt collection business was founded in 1956 in Lower Hutt by Ray McLaughlin (whose sons Neil and Keith were successive managing directors), but in 2001 it announced plans to merge with Sydney-based Data Advantage and become an Australian company.

As part of its response to the Allco bid, the company has said it wants to split off the debt collection business.

Want said he "wouldn't discount" the option of it being floated with a primary listing in New Zealand.

"I think there is some merit in a New Zealand primary listing ... the business is so well known in New Zealand. People have made a lot of money on Baycorp in New Zealand.

"Yes, people lost money at the time of the dotcom collapse, but in my discussion with investors and advisers, the feeling is that, by and large, the company is viewed positively."

But a New Zealand float would not be the preference in terms of "speed of solution" and the company had seen strong buyer interest in the debt collection business.

"We want to find the most efficient process. Logic would suggest a trade sale is the best way to go," said Want. However, he noted the debt collection business had been rebuilt over the past two years and was ready to go to the next level to promote faster growth: investing in debt portfolios from the likes of utilities and telecommunications companies, and investing in technology.

"A trade buyer might not have the right capital base or operating efficiencies - on the other hand, a trade buyer does know the business."

Want said the goal is to complete the internal separation of the business early in the first half of next year. But there was no intention to "give the business away". "In terms of brand presence and top of mind - particularly in New Zealand - the Baycorp brand is just brilliant."

Kiwi heritage

* Baycorp established by Ray McLaughlin in 1956

* Listed on the NZX, June 1986; Neil McLaughlin is chairman and MD

* A hot stock in the 1980s boom; 1987 crash and an aggressive expansion strategy in Australia forces company to write off Australian assets

* Keith McLaughlin takes over as MD; company recovers

* Plans to merge with Sydney-based Data Advantage in 2001 and shift primary listing to Australia.

* Net earnings drop well below pre-merger expectations; McLaughlin resigns early 2004

* In July, private equity firm Allco announces it wants control of Baycorp. The bid fails but prompts the company to consider spinning off debt collection business