KEY POINTS:
Whether the transaction was driven by debt concerns or not, Auckland lines company Vector's shareholders overwhelmingly backed the company's $785 million sale of its Wellington electricity network yesterday to Hong Kong's Cheung Kong Infrastructure yesterday.
Vector's constitution requires that a majority of shareholders approve transactions valued at more than 15 per cent of the current market cap, and at $785 million the sale represents 37 per cent of Vector's current market value.
But with 75 per cent Vector owner the Auckland Energy Consumers Trust backing the deal, yesterday's vote at a special meeting was a foregone conclusion.
Chief executive Simon MacKenzie said the 99.83 per cent of votes cast in favour of the deal recognised that "a significant amount of other shareholders were also in favour".
Among reasons Vector has given for selling the Wellington network, which it acquired with the rest of UnitedNetworks in 2002, was that it was older than its Auckland network, had a different capital expenditure profile, and that demand was growing too slowly.
"It is worth noting that debt reduction was not a key motivating factor for the sale of the Wellington network," MacKenzie told shareholders. However, he said some proceeds of the sale would be used to repay debt, reducing the company's gearing from 62 to about 50 per cent.
But Energy sector analyst Chris Stone of Rockpoint Corporate Finance believed it was "odd" for an infrastructure company like Vector to be selling off an asset like the Wellington network and the sale was likely being conducted for financial reasons rather than strategic ones.
"In order to acquire NGC they took on quite a bit of debt. They've been able to manage that and I'm sure they haven't breached any covenants but I think that in this environment when a company has got exposure to higher debt levels that will be raising some concerns internally."
However, MacKenzie was adamant the sale decision was not based on debt concerns.
"It basically comes down to the fundamental drivers of value in infrastructure assets. As we go through those criteria, we still believe this is the best outcome for shareholders and doesn't preclude us from continuing growth with the assets we have."
MacKenzie remained confident the transaction would gain Overseas Investment Office approval with Cheung Kong being a "a highly competent network operator". Vector shares closed down a cent at $2.07 yesterday.
CHEUNG KONG INFRASTRUCTURE
The prospective buyer of Vector's Wellington electricity network, Cheung Kong Infrastructure, is part of Asian tycoon Li Ka-Shing's Cheung Kong Group.
Cheung Kong has interests in 56 countries, about 260,000 employees and assets including property, hotels, telecommunications and ports and its listed businesses are estimated to have a combined market capitalisation of HK$809 billion. Its businesses include Hutchison Whampoa, the modern descendant of one of the original Hong Kong trading companies.
Li, with a net worth estimated at US$26.5 billion, is believed to be the world's 11th richest person.
Another Cheung Kong company, Hutchison Port Holdings, sought a half share in Lyttelton Port two years ago, which prompted local opposition on the grounds of Li's alleged links to China's Government and military.
