Takeovers Panel stops Vector bid for NGC

By RICHARD INDER

Vector's $1.3 billion takeover bid for gas pipelines group NGC ran into difficulties last night after the Takeovers Panel blocked a key part of the deal.

The Auckland powerlines company wanted to buy a 66 per cent cornerstone shareholding in NGC from Australian Gas Light (AGL), by acquiring the New Zealand holding company for the shares.

To do this it needed the regulator's exemption from rules that shareholders must sell directly to the company making an offer. But the panel decided such an exemption would break its own rules.

"The panel considered that the reasons for requesting the exemption, which principally concerned taxation issues and the scale of transaction costs which may be incurred, did not provide a proper basis for the panel to exercise its exemption powers."

The panel said the Takeovers Code provides other mechanisms that AGL could use to sell its interest in NGC, but did not specify what those alternatives might be. A spokeswoman could not be contacted for further comment.

Vector chairman Michael Stiassny said he was "severely disappointed" by the ruling. But he insisted it would not short-circuit the company's $3 a share offer, which is the first step towards its public listing.

"We are still bound with AGL and we are looking for another structure," he said.

The ruling was unlikely to push up the the cost of the takeover for Vector.

Stiassny said the ruling was especially surprising because the panel had approved a similar structure when Origin Energy acquired a $1.67 billion stake in electricity generator Contact from Edison Mission Energy of the United States this year.

Stiassny suggested the panel might have taken a different approach because of fallout from a controversial ruling on Prime Infrastructure's $680 million bid for New Plymouth's Powerco. This inadvertently gave overseas shareholders in Powerco a better offer than New Zealand shareholders. It also prompted the mass sale of Powerco shares to overseas shareholders and sparked a wave of criticism of the panel.