Doubt over TrustPower buyback

By CHRIS DANIELS

The Takeovers Panel is holding an urgent meeting in Auckland today to consider whether TrustPower's share buyback scheme complies with the Takeovers Code.

The Tauranga-based electricity generator and retailer is offering shareholders $3.70 a share, in a pro rata, two-for-seven buyback deal.

Shareholders can, however, also ask the company to buy back 100 per cent of a stake.

TrustPower has a finely balanced register of shareholders, with listed infrastructure investor Infratil owning 27.9 per cent, the Tauranga Electricity Consumer Trust owning 22.7 per cent, Australian Gas Light (AGL) owning 20.5 per cent and US energy company Alliant owning 18.9 per cent.

The rest of the shares, 10.1 per cent, are owned by the public.

Analysts see the TrustPower buyback as a way of letting AGL get out of its TrustPower stake, which it so far has been unable to sell.

The Takeovers Panel says that the major shareholders may not be acting in compliance with the Takeovers Code as their control of TrustPower could increase as a result of the buyback.

It says that TrustPower shareholders must be given an independent expert's report on the buyback, before deciding whether to accept the $3.70 a share offered.

TrustPower delayed closing its offer to buy back shares by one week, to today.

Shareholders were originally going to be asked to approve the buy- back deal at a special shareholders meeting to be held after the company knew who was participating in the deal.

Company secretary Jeff Childs said the company took the view that it could not say what the consequences of the buyback would be until it knew who would be accepting the deal.

"Our point is that until we get the acceptances, we don't know what the consequences are.

"The reality is that we have four major shareholders. Depending on how they accept makes a big difference."

TrustPower is buying back 56 million shares, or 29 per cent of the company's capital.

Infratil and Alliant have agreed to enter into the buyback at the same level as the Tauranga Energy Consumer Trust decides to do, meaning their relative ownership stakes will remain the same.

Broker ABN Amro has recommended TrustPower's smaller shareholders not to accept the buyback offer, saying the $3.70 price is too cheap.

TrustPower chairman Harold Titter said the buyback was done to restructure the company's balance sheet because it was a "relatively lazy one".

While it could allow the exit of a major shareholder, this was not the reason it was being done.

An appropriately structured transaction could be tax free.

The board had insisted the offer was made to all shareholders and was not compulsory.