Three-way deal possible for Lyttelton

Paddy Austin

Christchurch City Holdings has had preliminary discussions about forming a three-way co-operative among Lyttelton Port, Port Otago and Hong Kong-based port operator Hutchison Port Holdings (HPH).

The chairman of Christchurch City Holdings, Paddy Austin, said yesterday her company had conducted some "very preliminary" but reasonably positive discussions with Port Otago and HPH.

"All I would say is the options do include some kind of co-operative relationship with Otago," she said.

"Our primary motive is to try and get the HPH deal to work under the new circumstances. If we can do that and then find a way as a partnership of HPH [Lyttelton Port] and [Christchurch City] to work with Port Otago then we would explore that."

Christchurch City Holdings this month launched a $2.10-a-share takeover offer for Lyttelton Port.

It wants to gain 90 per cent of the company, compulsorily acquire the remaining shares, de-list Lyttelton Port, and then sell a little under half to HPH, the world's largest port operator, with which it would form a joint venture to own and run the port.

However, last week Lyttelton Port's biggest South Island rival, Port Otago, threw a spanner in the works by lifting its stake in the port to 10.1 per cent - enough to stop Christchurch City winning 90 per cent of the company.

Port Otago insists its holding is not a blocking stake, a claim that is meeting widespread scepticism. Port Otago chief executive Geoff Plunket said it was a long-term investment.

"For a period of time, there have been comments about the need for consolidation in the industry. We do not have a view on Hutchison, but we are interested in talking to all parties."

Port Otago has a lot to lose if it is left out of a deal between Lyttelton and Hutchison. The Hong Kong company would bring capital resources, world best practice and greater bargaining power with the major shipping lines, attracting lucrative container traffic.

This week, Port Otago chairman John Gilks told the Otago Regional Council that Lyttelton Port, with its larger export and import volumes, was a "sleeping giant".

He said Port Otago expected Lyttelton to be a "formidable competitor" in the future and when that happened "we want to be inside the tent".

Otago paid $2.35 a share when it boosted its Lyttelton Port stake last week, 25c a share more than Christchurch City's offer and more than a third higher than the share price before the bid was announced.

LPC shares closed at $2.16 yesterday.