Prime advises Powerco hold-outs to take the cash

By GARETH VAUGHAN

Australia's Prime Infrastructure yesterday warned Powerco shareholders to accept its $680 million takeover offer or risk being forced to accept the controversial bonds.

Prime chief executive Chris Chapman said his company was confident of getting 90 per cent support for its takeover offer by the time it closed at 5pm today. Last night, Prime said it had secured 80 per cent of Powerco's shares. If it reaches 90 per cent, Brisbane-based Prime will be able to compulsorily acquire the remaining Powerco shares.

Chapman urged shareholders who had not yet accepted the Australian investment fund's takeover offer to give it "urgent thought". If Prime did not reach 90 per cent there would be no extension to the offer nor a change in its terms.

Prime is making a full takeover offer for Powerco valued at $680 million, or $2.15 a share, after securing support from the New Plymouth District Council and two Taranaki community trusts which combined own 53.6 per cent of the Taranaki-based power lines and gas network company.

Chapman said shareholders could either accept one of the three options Prime was offering - cash, bonds (known as sparcs, for subordinated prime adjusting reset convertible securities), or cash and sparcs - or do nothing.

"The trouble with doing nothing is if we do move to compulsory acquisition, they will be provided with the option we outlined in the takeover offer. That is 100 per cent of the consideration in sparcs. Therefore, they would not be choosing an option that necessarily best suits their circumstances," he said.

In its report, the independent appraiser of Prime's bid, Grant Samuel, said the likely market value of the sparcs, which pay an interest rate of 8.5 per cent, was "difficult to determine".

Furthermore, they could trade at a substantial discount if there was a large number of sellers.

Direct Broking director David Speight said Prime was likely to succeed in reaching its 90 per cent target. But as numerous institutional shareholders held Powerco shares, it was likely many would not sell to Prime until the last minute.

Powerco shares fell 4c to $2.06 yesterday.