Sweetener woos Owens

By PAM GRAHAM

Mainfreight yesterday sweetened its offer for Owens Group by 7c to $1.10 a share and won a unanimous recommendation from the board of its rival.

The marriage of the two competitors is conditional on Mainfreight's acquiring at least 90 per cent of Owens by October 31.

The only major institutional shareholder is AMP Henderson, with 10.7 per cent, and yesterday it was still making up its mind.

"We haven't decided yet but I can't see anything further developing from here onwards," said Nat Vallahb of AMP Henderson.

The other key players will be the family of founder Sir Robert Owens, with between 30 and 35 per cent of the company. Doug Owens did not return calls yesterday.

The bid, Mainfreight's first for a listed rival, is seen as a response to Toll Holdings' offer for Tranz Rail, which owns the Tranz Link road transport business. Toll sweetened that bid in order to get directors' approval and success remains subject to a 90 per cent acceptance hurdle by an October 10 deadline.

Together Mainfreight and Owens will have revenue of more than $800 million, compared with Tranz Rail's $600 million.

The domestic road transport industry has an estimated 5000 operators.

The companies are secretive about market shares but the heavyweights are Five Star Group (which includes United of Northland, Provincial, Hookers and Transport Nelson), Mainfreight, Eastern Equities (encompassing Hawkes Bay Farmers and Road Freighters), then Owens Group, Rotorua Forest Haulage and Linfox.

Toll, which has so far received acceptances for 43 per cent of Tranz Rail's shares, has described Owens and Mainfreight as underperforming and taken credit for being a catalyst for industry consolidation.

Owens earned $7 million before interest and tax on revenue of $438 million last year and had its own expansion plans before Mainfreight's unsolicited bid.

Mainfreight earned $16.93 million before interest and tax on revenue of $417 million. It is not happy at the prospect of Toll owning a monopoly rail operator and a competing truck fleet but has talked to the Australian company about shifting more freight from road to rail.

Mainfreight already owns 15.5 per cent of Owens and intends to keep the brand. It is expected to sell some Owens assets and has also said it will raise new equity within 18 months to restructure the bank financing it is using for the deal. Its adviser is Grant Samuel.

Mainfreight's new offer values Owens at $62.19 million. Mainfreight was valued at $106.49 million at yesterday's share price of $1.29. Owens' shares rose 3.85 per cent to $1.08 in response to the increased offer.

Mainfreight's hostile takeover led to a clash between the two truckers over disclosure, but Mainfreight managing director Don Braid said discussions between the two more recently had been "good" and Owens had "been somewhat more forthcoming".

"Obviously we will look at all facets of the business once we have completed the transaction," he said.

The Owens board said the new offer was inside the $1.09 to $1.27 a share valuation by Deloitte Corporate Finance and directors would be accepting the bid for their own shares.

Mainfreight itself is relatively protected from takeover because founders, including Bruce Plestead, own 28 per cent. Decisions on the form of a future equity raising could change that.

If Mainfreight is successful, Owens will be delisted.

Mainfreight's new offer

$1.10 a share.

Values Owens Group at $62.19 million.

Offer closes October 31.

Combined Mainfreight/Owens will have revenue of more than $800 million.

Owens board recommends shareholders accept the offer.