Dialogue: The numbers behind the Lion's move

By BRENT WHEELER*

Further to yesterday's instalment, a brief update and some numbers on the Montana takeover as we observe:

*Brokers declare that minorities have been exploited,

*The Chairman of the Auckland Chamber of Commerce worries about New Zealand's reputation,

*The Government says the situation is unacceptable,

*There are numerous statements saying a Takeover Code would have prevented this intolerable situation,

*Mr Peters says we should have passed the code years ago.

Point One

With the Lion bid the shareholders' wealth increased by over $53.7m compared with the previous bid. Everyone is better off. Competition in the capital markets added $53.6m for all, including minorities.

Point Two

If there had been no bids at all, and the price had remained around $4.00 (optimistic given a 2000 range of $1.70 - $4.02 and a low even in 2001 with a bid likely, of $3.84) at least $85.8m in shareholders wealth would have been lost. Everyone, including minorities would have lost.

Point Three

If there had been a Takeover Code then:
*There may have been no bid, at $4.40 loss, minimum $85.4m

*There may have been no bid, at $6.65 loss, minimum $139.5m

*100% would have been "force bought", at $4.40 loss, minimum $53.7m (if there was a bid this high)

Conclusions

*The takeover has enhanced shareholder wealth

*The competition has enhanced it even more

*The wealth increase for everyone at 16.25% is considerable

*The Takeovers Code would have prevented an increase this big and possibly any increase at all

*The NZSE got it right for shareholders

*There are more green eyes and self interest than there is exploitation.

* Brent Wheeler is an economic analyst.