Port takeover gets tougher

The property values of takeover target Ports of Auckland have risen significantly in updated valuations - not enough to spur Auckland Regional Holdings to increase its offer price, but enough to toughen shareholder resistance.

ARH is offering $8 a share for the 20 per cent of the ports company it does not already own. Yesterday, it had 85 per cent of the company, unchanged from 10 days ago.

The April 1 offer, which has been extended twice, closes on July 1. The shares closed up 2c yesterday at $7.92.

The ports company said yesterday that its waterfront investment properties had been independently revalued at $182 million, compared with $102 million when they were last valued on June 30 last year.

The port operations land and facilities had been revalued at $462 million, compared with $290 million when last valued in June 2002.

It said the valuations were part of the normal year-end process.

Grant Samuel, which valued the port shares and ARH's offer for the company's independent directors, had confirmed that the revaluations had no impact on its valuations in the target company statement of May 10.

The investment property valuation was within Grant Samuel's range of $170 million to $197.5 million. The company said the port operations land revaluation had no effect on Grant Samuel's report because it had valued the operations business using capitalisation of earnings and discounted cash flow approaches.

ARH chief executive Peter Casey said the $8-a-share offer was unchanged.

The updated property values were "all to be expected".

The ports company's independent directors, who have declined to recommend whether shareholders should accept or reject ARH's offer, had no comment on the updated valuations yesterday.

Some analysts have said the low level of acceptances is because the offer price does not reflect the true value of the company's land.

ARH's power to get the port's waterfront investment land rezoned from industrial to residential and commercial was a big influence in the company's value. Grant Samuel said the value of the investment land could nearly double overnight to nearly $200 million when it was rezoned.

So yesterday's updated valuation to $182 million, before rezoning, can only fuel the doubts of investors who are holding out for a higher price.

The offer values the company at $848 million.

When ARH made the offer on April 1, the share price was $6.45.

Grant Samuel concluded the fullyunderlying value of a port company share was between $7.68 and $8.55. Independent directors concluded the offer was fair, but may not be "reasonable" because of a number of potential influences including valuation of the investment property and gains or losses of shipping services.

The offer price represents a 24 per cent premium over the closing price of $6.45 the day before the offer was announced.

ARH views the full takeover as a chance to preserve Auckland's waterfront for the integrated development of the port company's blue chip real estate for port operations and public use.

Under the shareholding structure the port company has to consider minority shareholders' interests, a fact which has hamstrung the development of land for public use.