Watchdog approves Powerco sale deal

By CHRIS DANIELS


The Takeovers Panel has given its blessing to a controversial deal that allows the New Plymouth District Council to sell surplus bonds paid out in the Powerco takeover deal.

Last week, the panel said the deal, where Sydney brokerage Tricom agrees to take on the bonds issued by Prime Infrastructure, might breach the Takeovers Code that says all shareholders must be treated the same.

After a day-long meeting in Auckland on Tuesday, the panel said yesterday it was satisfied the deal did not break the law.

The panel interviewed New Plymouth mayor Peter Tennent, his chief executive, senior Prime executives, Tricom managing director Lance Rosenberg and PricewaterhouseCoopers representatives.

Prime's $680 million takeover bid for the New Plymouth-based powerlines company nearly came unstuck when shareholders began registering their shares overseas last month. This meant they could be paid out entirely in cash, not a mix of cash and low-ranking bonds.

This follows a panel waiver allowing overseas shareholders to get cash only for their shares. It was thought this would reduce Prime's pool of cash to pay New Zealand investors.

But the fears were eased when Tricom agreed to buy up to $50 million worth of surplus bonds from the council and community trusts.

This deal was struck only after the council and trusts shifted their shareholdings to a Sydney address - a move that would have ensured they received a cash payout for their 53.6 per cent stake in Powerco.

Peter Hinton, a partner at Simpson Grierson, which advised the council on the deal, said it was no surprise to him that the panel approved the deal with Tricom.

"The fact is, the council did its own deal and shareholders who intend to accept a bid can do any deal they want - to lay off risk, or change the asset portfolio as they want. If the panel had ruled contrary to that, we would have been flabbergasted."

Hinton said the only real issue for the panel to consider was whether Tricom had, in some way, an inappropriate relationship with Prime.

"We knew they didn't, because we did the deal."

Other Powerco shareholders had not been disadvantaged by the council's deal. They could still change their shareholding address - a simple task that took 10 minutes - to ensure a cash payout.

Tricom and other brokers, especially in Australia, had a substantial appetite for the bonds and were willing to buy them.

Hinton said the council transferring its shares over to an Australian address had not been done as part of a plan to pressure Prime into changing its terms.

"That was never part of our leverage on them, it was part of our backstop if we hadn't been able to negotiate an outcome," he said.

* Takeover documents have now been posted out by Prime.

Powerco will post out an independent report and advice from directors later this month, advising on the merits of the Prime offer.

Prime is paying $2.15 a share. Powerco shares closed at $2.12 each yesterday, up 2c.