Contact's share price dips as Origin merger gathers steam

Contact Energy's share price began the week with a 9c fall to $7.36, as the company prepares to put its case for a merger with parent company Origin Energy to shareholders.

The energy company's share price jumped on last month's announcement of the merger, up nearly 14 per cent from the day before it was unveiled.

Now trading around the $7.45 to $7.50 range, it is still not as high as its peak of $8 reached in July last year.

Takeover regulators need to approve the merger structure on both sides of the Tasman, giving waivers that will allow minority shareholders - but not Origin - to vote on key constitutional changes.

Contact hopes these approvals come in the first half of April.

The NZX must also decide on what index weighting it will give Contact - the second largest listed company by market capitalisation. Contact's weighting on the NZSX-50 will slip after the merger, when all the 51 per cent shares owned by Origin are cancelled. A spokesman said it was not anticipated Contact would fall below at least the sixth biggest company on the NZX.

An independent appraisers report is due for completion by the second half of next month or early in May.

This should be sent out along with an explanatory memorandum to all Contact shareholders in the second week of May. A special meeting of shareholders is likely for early June.

All these dates are dependent on the various regulatory approvals being given.

THE DEAL

* Origin Energy, which owns 52 per cent of Contact, wants to merge to form a dual listed company.

* Origin and Contact shares will continue to trade on their sharemarkets but will be run by a unified management.

* Contact shareholders will own 24.3 per cent of the merged business.

* Should the merger be approved, it is expected that it will be completed early in the next financial year (which begins on July 1).

* Some big shareholders say the merger deal undervalues the Contact shares.