Vector pushes ahead with NGC takeover

NGC's share price is starting 2005 at levels that will not please Vector.

The Auckland-based energy network company is offering $2.91 a share to NGC shareholders, in a $1.3 billion takeover offer set to close on February 4.

It already owns two thirds of NGC's shares, which it bought last year from Australian Gas Light (AGL), and is hoping to gain enough acceptances to clear the 90 per cent ownership threshold needed to compulsorily acquire all shares.

NGC shareholders may not lose out by simply holding on to their shares. If Vector is successful in reaching the 90 per cent threshold for compulsory acquisition of all shares, then the same price is paid to those who held out.

If it fails to reach the 90 per cent, there is a chance it will increase its offer to include preferential rights in its own initial public offering and sharemarket listing.

The IPO is expected to raise between $500 million and $600 million - money which will be used to pay back bridging finance borrowed to buy the two thirds stake in NGC from AGL.

Shareholders refusing to sell could run the risk of it leaving NGC listed on the stock exchange, mopping up remaining shares at a much lower price, further down the track.

Some analysts have said they expect a higher price to be paid for NGC shares, since the business benefit of a fully merged company will be worth so much to Vector.

This view seems to be vindicated by the NGC share price, which has not fallen below the $2.91 price since early September. It did drop to below the $3 mark when Grant Samuel valued the company's shares at between $2.50 to $2.76 each.

NGC's independent directors recommend shareholders take the offer but also suggest selling them on market, in order to get a better price.

They warned that shareholders holding out for payment in Vector scrip rather than cash should be wary, since there may not be enough shares available for it to offer, once they have been given out in the IPO.

Vector is hoping that NGC shareholders will start looking at the takeover offer in the next few days. If it decides to give an update of its progress towards the 90 per cent level, it is not likely to be made until closer to the February 4 deadline.