KEY POINTS:
A day after announcing it would not increase its buyout offer for Tourism Holdings, MFS Living and Leisure has agreed to a 6c a share early dividend that will boost shareholders' returns on top of the takeover.
But observers say the final dividend - to be paid by Tourism Holdings but agreed to by MFS - is unlikely to sway those shareholders unimpressed by the bid.
Australian firm MFS Living and Leisure is offering $2.80 for all of the company conditional on 90 per cent acceptance but currently holds only 22.72 per cent.
MFS confirmed this week, at Tourism Holdings request, that the offer would not be raised.
However, MFS yesterday agreed to waive a condition of the offer and let Tourism Holdings pay a 6c fully imputed final dividend without cutting its offer price.
The dividend, taken together with the offer, effectively gives shareholders 2.1 per cent more.
Paul Robertshawe, portfolio manager for equities at 5 per cent shareholder Tower Asset Management, said the dividend had improved the offer.
"But if people had a view that $2.80 wasn't compelling then $2.86 isn't materially different to that."
Tower was yet to make a final decision on the offer, which has been recommended by Tourism Holdings' independent directors.
First NZ Capital analyst Jason Familton said the 6c dividend increased the chances of the offer being successful "but I still think its still unlikely at this stage".
"The dividend at the end of the day is the shareholders' money anyway," Familton said.
Tourism Holdings chairman Keith Smith said the decision to pay a dividend was not related to the progress of the takeover, other than the timing being three months earlier than normal.
"We had a board meeting on Monday, we looked at our results for the year ended June 30 and we felt that the year has finished and we would normally be paying a 6c final dividend," Smith said.
"So we wrote to MFS under the takeover offer documents and asked them whether that was acceptable to them and we got a response back, saying yes."
The dividend would be paid irrespective of the outcome of the takeover offer. This week Tourism Holdings decided not to pay a special dividend of up to 30c a share, making use of available imputation credits.
The special dividend was a separate issue to the year-end payment and would have affected the offer price.
The imputation credits would be forfeited should the takeover go ahead and a special dividend would not be paid.
Robertshawe said Tower had made it clear to the board they were unhappy about the decision.
MFS Living chief executive Marshall Vann said the offer price had not been increased.
"I think it would be somewhat churlish for us not to [agree] really, it's the final dividend of the year."
Vann reiterated that MFS' $2.80 share offer was "absolutely final."
If the offer was unsuccessful MFS would return any acceptances leaving the company with a 10 per cent stake bought from the Cushing family.
Vann also did not think MFS would come back for another look.
"If people have voted with their feet and said no I can't see why I'd want to go down that street again."
Shares in Tourism Holdings closed up 15c yesterday at $2.70.
The Offer
* MFS Living and Leisure offering $2.80 a share for Tourism Holdings.
* Conditional on 90 per cent acceptance.
* Only 22.72 per cent of shares bought so far.
* Shareholders to get a 6c final dividend.
* Offer closes on July 21
