Owens in the headlights

By PAMELA GRAHAM

Freight company Mainfreight yesterday announced a $56 million takeover offer for rival Owens Group, to applause at its annual shareholder meeting in Hamilton.

Managing director Don Braid said the aim was to create a strong New Zealand-owned transport firm able to play a significant role in the economy.

At the same time, he gave a strong indication that Mainfreight was keeping a close eye on the future of Tranz Rail.

The 50 shareholders at the meeting were reminded that the company's annual profit rose 36 per cent to $9 million in the year to March 30.

Braid added the good news that profits in the first quarter of the new financial year had risen 62 per cent and results last month confirmed the trend.

The focus was on continuing that growth, he said.

"Here in New Zealand the opportunities are plenty in terms of organic growth utilising our very powerful supply-chain logistics formula and, of course, what may come from our Owens strategies and from the outcome that will prevail for Tranz Rail."

Mainfreight, which already owns 15 per cent of Owens, will make a full takeover bid at $1.03 a share conditional on obtaining 90 per cent of the company.

The offer goes to shareholders on August 15 and will run to September 15.

Braid said the bid would be funded by bridging finance from banks, with an intention to raise equity within 18 months.

The equity raising did not necessarily have to be through a rights issue.

"It's important the ownership of Owens remains in the hands of New Zealanders, as Sir Bob Owens would have wanted."

The takeover would, he said, return shareholder value that was not likely to occur under the present Owens management, who lacked knowledge about the transport sector.

After the offer was announced, Owens shares rose 8 per cent to $1.02. Mainfreight was unchanged at $1.33 at the close.

Mainfreight made it clear that it was concerned about Tranz Rail's future.

Chairman Bruce Plested was highly critical of the way the rail company was run.

In 1993, he said, Mainfreight put $24 million worth of business on rail. That figure was now $15 million a year because of poor service.

But he also described the takeover offer by Australia's Toll Holdings as unpalatable.

Mainfreight would prefer that Tranz Rail went to a specialist rail operator because competition issues could arise if a trucking company took over rail.

"It is difficult to move freight on to a railway that is competing directly with us."

Braid emphasised the firm's unhappiness with the Government's decision to deal only with Toll, and with the prospect of "handing sole access and control of New Zealand's rail ferry network, along with a very sizeable track fleet, to a non-New Zealand-owned competitor".

"Should we be able to bring some influence to these decisions, we will," he said, noting with some satisfaction that the Toll bid looked unlikely to succeed in its present form.

The meeting approved all resolutions put to it, including raising directors' fees to a total $200,000. One shareholder even proposed that the board have the power to lift fees to $400,000.

Catching the general mood of satisfaction, Plested recalled that "25 years ago two of us stood in an empty rented shed in Panmure, Auckland. We had $7200 in the bank and a developing passion to do freight in New Zealand better than it had ever been done before. This result continues that passion."

Plested paid tribute to director John Fernyhough, who died last year. New directors Emmett Hobbs and Bryan Mogridge were elected, and Act party leader Richard Prebble was re-elected to the board.

One note of dissent came from an unnamed member of the Shareholders' Association, who criticised the staff photo in the annual report, saying some looked like "members of the mafia suffering from an upset stomach after lunch".

Braid replied they needed to be "as tough as they look to run the Australian business".

How they line up


OWENS GROUP

Main business: supply chain, international freight, transport, warehousing, shipping agency services, container services.

Market capitalisation: $52.59 million.

Founded by Robert Owens in 1953 and listed on the stock exchange in 1985.

MAINFREIGHT

Main business: New Zealand domestic transport, Australian domestic transport, managed warehousing, international transport, wholesale air and sea freight.

Market capitalisation: $109 million.

Founded by Bruce Plested in 1978, Mainfreight was publicly listed in June 1996 and now has interests in the US and Asia.