Vector mulling its options on NGC

Prospects of a new bid for NGC by Vector are already being canvassed after the energy network company's disclosure that it snared just 1.2 per cent of shares in its below-market takeover offer.

NGC, which owns gas pipelines, is now 67.2 per cent owned by Vector. It bought 66 per cent from Australian energy giant AGL last year.

Despite a scattering of newspaper advertisements, Vector has not pushed its takeover publicity hard. It had little chance of convincing shareholders to sell at $2.91 a share when the sharemarket price has consistently been about $3.10.

NGC shares closed yesterday up 2c at $3.15.

All eyes are now on what "plan B" will be. Should Vector stump up extra money and launch a better offer to mop up the remaining 32.8 per cent of shares, or just sit and wait?

Shareholders hoping for a better price to be offered - along with the prospect of preferential treatment in the Vector share float - may simply be left hanging by a Vector happy to proceed with a full takeover much further down the track.

It is understood any new offer - whether at a higher price or including new rights in any share float - will also have to go before the fractious Auckland Energy Consumer Trust, which owns 100 per cent of Vector on behalf of Auckland power users.

After a legal fight, the plan to buy NGC and privatise part of Vector was approved by the trust, despite three of the five members being opposed.

Chairman Warren Kyd used a casting vote to push the plan through, after trustee John Collinge was barred from voting.

Alliance Capital fund manager John Norling said he did not expect to hear anything from Vector until NGC's interim financial results, due on February 22.

Vector has now paid $865.8 million for its stake in NGC. Chairman Michael Stiassny said the company was comfortable with that level of ownership.

Vector must now decide how much it is worth to the company to fully merge its operations with NGC.

This will undoubtedly bring great cost savings - Stiassny has said dividend payouts to power-using beneficiaries will double after the merger.

This will be despite the dividend stream now being shared with the new shareholders, who will own 24.9 per cent of the company.

Vector has promised to float before the end of this year - when a bridging finance facility with merchant bankers ABN Amro is due to expire.

Independent valuer Grant Samuel last year said the full, underlying value of NGC shares was in the range of $2.50 to $2.76, well below the $2.91 being offered by Vector.

NGC's directors even recommended that their shareholders accept the offer - subject to their own personal circumstances.

They said there was no guarantee the NGC shares would continue to trade at current levels once the takeover offer was gone.

Although it looks cheap now, the original offer price was "in line" with the market price immediately before the AGL-Vector purchase deal.