Richard Inder: ARH faces savvy investors in Ports of Auckland battle

Auckland Regional Holdings, the Auckland region's investment manager, is putting a brave face on its bid to buy out Ports of Auckland minority shareholders to get full control.

But it is sounding a little desperate.

Every pessimistic comment from institutional investors about the prospects for the bid is met with an upbeat riposte from ARH that all is going to plan.

This week was no exception. As it emerged that some institutional investors continued to buy into the port, presumably on the expectation that ARH will lift its offer, it said: "ARH is confident it will achieve 100 per cent ownership of Ports of Auckland."

And it reiterated that message yesterday as it extended its offer for the second time until July 1.

Certainly it is within a cooee of its objective.

At the latest count, holders of more than 5 per cent of the port's shares had accepted the offer, taking ARH's interest to 85 per cent, just shy of the 90 per cent threshold allowing it to acquire all the outstanding shares.

Acquiring another 5 per cent does not seem that unreasonable as a goal.

But the names on the share register must be giving ARH pause for thought.

Recent buyers such as ACC and MFL Mutual Fund are savvy investors, and are warning enough that the battle is not won.

However, the name that must be causing ARH most concern is Kiwi Forests Group, which has 0.16 per cent of the company.

This is the consortium of property developers that bought the former Fletcher Challenge Forests estate for $725 million last year.

The principals of Kiwi - Ross Green, Adrian Burr, Trevor Farmer and Mark Wyborn - are among the most astute investors in the country. The forest buy is by itself testament to this. The four got their hands on 107,000ha of land, much of which can be converted into lifestyle blocks and dairy farms, by selling the cutting rights to the trees.

More importantly, Farmer, Wyborn and Burr are key figures behind the development of Auckland's Viaduct Harbour, and are in a better position than most to resolve the uncertainty hanging over the ARH bid.

One of the main reasons ARH is not gaining great traction from institutional investors is the uncertainty over the value of the waterfront land.

Regional authorities have the power to lift the value significantly by rezoning it from industrial to commercial or residential.

Indeed, an independent appraisal of the bid by accountants Grant Samuel said the waterfront investment land could double overnight to more than $200 million if it were rezoned. It was partly for this reason that the independent directors said the offer might not be reasonable.

ARH has so far shown that it expects the land to be rezoned.

Take this quote, for instance, from ARH chairwoman Judith Bassett: "Under ARH's 100 per cent ownership, all POAL land will remain in public ownership, and this will assist in the integrated development of the total waterfront area for port operations and public use."

Wyborn, Farmer and Burr, owning much of the land west of Queens Wharf to the harbour bridge, will have a very good fix on the development potential and, as a result, the land's value.

They will also have a good fix on how much more ARH can bid.

Their stake is not huge, worth just under $1.4 million at the $8 a share takeover offer.

To most people this is a significant sum. But as the National Business Review has estimated their collective wealth at well over half a billion, it may be the four are having a flutter.

However, teaming with ACC, MFL, they will, at the least, have more than enough shares to call for another independent appraisal. They will be in a strong position to argue for a sweetener.

On Meridian

Meridian Energy's new wind farm near Wellington highlights what will become a theme in the energy debate over the next few years.

Until recently wind farms were treated as curiosities. When the old ECNZ installed a small turbine in the Wellington suburb of Brooklyn, the local papers were full of comment about the beauty or even sculptural qualities of the turbine.

Indeed, even now surveys, albeit commissioned by Meridian, report people favourably disposed to wind farms. That view is set to change.

The plant, set to be one of the largest and most productive in the world, meets the desire of all electricity planners that future sources of generation should be placed near centres of population.

But it is also a feature of this form of generation that it is most suited to the most inhospitable places - windswept ridges and wild coasts, areas that because of their lack of development are now regarded as rare andprecious.

Together these imperatives often force the construction of turbines in areas where lots of people spend their recreation time.

The protest over the development at Makara will be repeated in Auckland as turbines appear on the hills above the west coast beaches.

As turbines become common, their value as curiosities declines. Hopefully, the controversy will also usher more sense into the debate over how to meet New Zealand's future energy needs.