Edison announces stand for control of Contact

By RICHARD BRADDELL utilities writer

Edison Mission Energy has resolved the uncertainty over its intentions towards Contact Energy, yesterday announcing a stand in the market that would take its shareholding to 51.16 per cent, giving it outright control of the board.

It will pay between $2.90 and $3.25 a share for a further 8.5 per cent of Contact, investing between $142 million and $160 million for the 49 million shares.

The offer will open on Monday, May 21 after Contact shares have gone ex dividend.

Edison senior vice-president Bob Driscoll said the offer reflected the California-based company's ongoing confidence in the New Zealand economy.

But he conceded that it was also timed to beat the introduction of the new takeovers code on July 1 and that it was more tax-efficient to make the offer once the imputed dividend had been paid to existing shareholders.

Edison has been thought to be either a buyer or a seller of Contact shares, but the market has been uncertain which way it would jump.

Mr Driscoll would not comment on whether Edison might move to 100 per cent in the future.

But he said the increased shareholding had been helped by recent capital restructuring.

The announcement comes six weeks after Edison spent $240 million redeeming preference shares used to partially pay its entry into Contact.

Edison intends to raise between $150 million and $200 million through a new issue of redeemable preference shares, and will also put in place additional financing arrangements, Mr Driscoll said.

The offer is unexceptional beside the $3.10 investors paid when the company was floated two years ago, but brokers expect it to be filled quickly given that the share price has rarely been above $3 this year.

Analyst James Miller of ABN Amro said Edison was finishing the job it began late last year when it lifted its stake from 40 per cent.

"It's a clear move to take control of the board, which is an appropriate move for a cornerstone shareholder."