KEY POINTS:
Interest by Ports of Auckland in buying the container business of rival Port of Tauranga is "kite-flying", says First NZ Capital.
Ports of Auckland managing director Jens Madsen made the surprise announcement during a meeting to release the company's full-year result on Wednesday. Previous merger talks between the ports failed last year.
Tauranga pulled out blaming Ports of Auckland owner Auckland Regional Holdings, who later withdrew support for a merger, saying it did not align with its long-term strategic approach.
In March, Madsen said the port's shareholder had made a clear decision on the merger and he did not expect it to return to the agenda.
This week Madsen said the rationale for change in the upper North Island was still strong.
First NZ Capital described Ports of Auckland's approach as kite-flying.
"We suspect Ports of Auckland's approach is more of a signal that it wants to talk again and perhaps there may be some change in thinking by its major shareholder which may support a transaction of some kind."
First NZ Capital gave an example of a merged container business, equally-owned by the two ports in a joint venture.
Ports of Auckland's total container volume was up 8.8 per cent at 840,993 twenty foot equivalent units for the year ending June 30.
Tauranga would release its full-year result next week, with an average analyst forecast for 530,000 twenty foot equivalent units.
Macquarie also said Ports of Auckland's overture seemed to be aimed at restarting discussions.
Issues facing the ports included investment during the next 10 years to accommodate next generation container ships, North Island over-capacity in container handling, shipping line rationalisation and both ports appearing to earn below weighted average cost of capital on either or both of their container handling or break bulk operations.
Ports of Auckland shareholder Auckland Regional Holdings faced greater pressure to maximise its portfolio return after a government backdown on the Auckland fuel tax, Macquarie said.
Another analyst said there was no prospect of Tauranga selling its container business.
"However, I'm sure that people will talk about it for the next three years as a prospect of future consolidation," he said.
Port of Tauranga chief executive Mark Cairns said yesterday there had been no contact from Ports of Auckland.
"It was a surprise, we found more detail in their press release and really we're waiting to see a proposal," Cairns said. "Certainly it's a growth part of our business, it's not a business we're looking to sell but we really need to see some ink on a proposal from them."
However, Port of Tauranga was committed to considering a merger, he said.
Port of Tauranga shares closed up 7c yesterday to $7.05.
Jens Madsen
* Ports of Auckland managing director.
* Joined in 2006 as chief operating officer.
* 28 years with the world's biggest shipping company AP Moller Maersk.
* Established and headed AP Moller Maersk's New Zealand arm from 1996 to 2000.
