KEY POINTS:
Ports of Auckland's new managing director Jens Madsen dropped a bombshell in yesterday's annual result by announcing the port's interest in buying Port of Tauranga's container business.
At the end of his results briefing, Madsen suggested combining the two ports would address the need for structural change in the sector, the challenge of accommodating larger ships in New Zealand and mounting competition from Australia.
Port of Tauranga chief executive Mark Cairns told the Business Herald the news came as a surprise and he had not been officially approached by Ports of Auckland before Madsen's announcement.
The two ports had worked on plans for a merger in 2006 but these were dropped when Tauranga withdrew from discussions early last year.
Ports of Auckland - owned by Auckland Regional Council subsidiary Auckland Regional Holdings - reported a net profit of $21.1 million for the year ended June 30, down from $64.6 million last year, which included one-off profits from its property portfolio.
Madsen said it had been a challenging and exciting year for Ports of Auckland, in tough economic and market conditions.
"The sustainability of New Zealand's existing port-sector investments, the industry's ability to invest in the future, and the global competitiveness of the country's supply chain might be assisted by the purchase of Port of Tauranga's container business by Ports of Auckland."
In response, Cairns said the Port of Tauranga had a responsibility to consider any expressions of a purchase offer. But a press release sent out shortly after Madsen's announcement suggested the Port of Tauranga would not be simply handing over its assets to Auckland.
"Port of Tauranga has always held the view that a full merger of Port of Tauranga and Ports of Auckland makes very good sense. That view has not changed," the release said.
Rob Bode of First New Zealand Capital said he considered Ports of Auckland's announcement yesterday as an attempt to refuel discussions.
"The perception was at the time that there was very strong commercial sense in a transaction," he said.
Madsen said the previous proposal was based on a merger, where as yesterday's announcement referred to the purchase of one party by another.
He said Ports of Auckland had arrangements with its banks and could look at using a combination of shares to fund a takeover.
But he would not say if the port would seek help from the ARH or the ARC to fund its plan. "It's too premature to talk about that now."
A single, integrated container business in the upper North Island would facilitate a more sensible and coherent approach to investment in road, rail and coastal shipping infrastructure.
Ports of Auckland's container business was New Zealand's largest and comprised the major part of Ports of Auckland business, he said.
By contrast, Port of Tauranga's container business, based essentially at Sulphur Pt and geographically separated from its break bulk operations, did not represent the largest and most profitable part of Port of Tauranga's business, Madsen said. "It may be in the interests of both companies to focus on their core strengths: for Ports of Auckland to optimise the investment in the container business for the upper North Island and for Port of Tauranga to obtain a better return on capital through divesting its container business."
Port of Tauranga shares closed up 6c at $6.98.
PORTS OF AUCKLAND
Revenue: $169.4m (up 3.9 per cent).
Ebitda: $71.9m (up 5.3 per cent).
Net profit: $21.1m (down 67 per cent).
