Cash-deal stoush for Prime

By CHRIS DANIELS


Prime Infrastructure looks to be headed for a fight over who will bear the cost of a Takeovers Panel ruling on its $680 million bid for Powerco.

The Australian company says this week's overseas flight of Powerco shares does not mean it will need to pay more money .

This would mean that the owners of 52 per cent of Powerco - the New Plymouth District Council and two community trusts - will have their payments scaled back and will have to take bonds instead of cash.

But the council says its deal with Prime does not provide for any such scaling.

The council's chief executive, Rodger Kerr-Newell, said it had signed a contract with Prime that it would be paid 62.5 per cent cash and 37.5 per cent bonds for its shares, and did not have to accept anything less.

Yesterday, 29.7 million shares, or 9.4 per cent, of the New Plymouth power lines and gas company changed hands, as foreign buyers rushed in to take advantage of a Takeovers Panel ruling which gives preferential treatment to overseas shareholders.

Powerco shares closed yesterday at $2.12 each, 3c below the Prime takeover price of $2.15.

The problems began when Prime asked the panel for a waiver allowing it to pay only cash to overseas Powerco shareholders.

The panel agreed, and foreign shareholders started buying Powerco shares for around $2.10 or $2.11 each, knowing Prime was committed to paying $2.15 cash for them.

New Zealand shareholders are selling because the more cash goes to foreigners, the more likely it is they will be forced to accept fixed interest bonds.

The panel said it would not allow the situation to arise again and that it had given Prime the waiver because only 0.3 per cent of Powerco shares were owned overseas.

Prime chief executive Chris Chapman said this week that the good story about its bonds was now starting to be told and he thought it likely that many New Zealand shareholders would ask to be paid 100 per cent in bonds.

The number of New Zealand shareholders willing to sell on the market to new overseas shareholders would stabilise.

He did not think the recent surge in share sales would lead to Prime having to pay more cash for the Powerco takeover than it had expected.

The potential for "gaming" with the takeover offer had been recognised, but did not place the Prime bid for Powerco in any jeopardy.

Just under 30 per cent of Powerco's shares - 93.1 million - have changed hands in the past 13 days of trading.

Kevin Landrigan, a New Plymouth accountant and opponent of the council's sale of the Powerco stake, said the deal had become increasingly "shonky" and it was time the Government stepped in to stop the whole process.

Many New Zealand Powerco shareholders had sold shares for well under the $2.15 takeover price, and after paying several cents per share brokerage, were substantially worse off than the foreign investors.

Cash vs bonds

* The Takeovers Panel waiver allowed overseas Powerco shareholders to take cash only.

* Those shareholders have been piling into the stock. Yesterday, 29.7 million shares changed hands.

* Prime Infrastructure says the overseas flight of shares doesn't mean it will have to pay more money.

* That means the New Plymouth District Council and two community trusts will have to take bonds instead of cash.