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Tourism Holdings is poised to be swallowed by a smaller Australian tourism operator after its board agreed to a takeover bid from MFS Living and Leisure.
ASX-listed MFS Living yesterday gave notice of plans for a cash offer of $2.80 a share for all stock in NZX-listed Tourism Holdings, valuing the company at $277 million.
Tourism Holdings shares rocketed 21 per cent on news of the takeover, closing up 47c at $2.74.
The deal would see Tourism Holdings with a market capitalisation of $223 million as of last Friday taken over by a company with a market capitalisation of A$175 million ($196 million).
Queensland-based MFS Living chief executive Marshall Vann said the bid would be financed by a capital raising of up to A$170 million, underwritten by Macquarie Equity Capital Markets, plus debt funding of about A$190 million.
The Tourism Holdings board said it intended recommending the offer to shareholders, subject to no higher offer being made and the independent appraisal report assessing the bid as within a fair value range.
Chairman Keith Smith said the question of Tourism Holdings making a takeover bid for MFS Living never came up. "The shareholders of [MFS Living and Leisure] were not interested in Tourism Holdings taking their business over," he said. "It wasn't an opportunity that was available to us."
Shareholders Association chairman Bruce Sheppard said the offer appeared to be fair to shareholders.
However, there was a national interest issue in relation to franchise businesses granted by the Crown including operations around Waitomo caves, Milford Sound and the Bay of Islands.
"They are all effectively Crown-sanctioned monopolies over national treasure assets," Sheppard said.
"So there is a national interest issue here in so far as we are passing the administration of quite sensitive habitats outside the control of New Zealand."
First NZ Capital analyst Jason Familton said his first impression was that the takeover offer was at a "reasonable premium to where the shares have been trading".
MFS Living said the $2.80 a share cash offer was a 29 per cent premium on a five trading day volume weighted average price.
Paul Robertshawe, portfolio manager equities of 5 per cent shareholder Tower Asset Management, said the offer looked like a "reasonable opening gambit".
National sentiments played no part in the market. "Anything that's listed has put itself up for sale to the highest bidder and, if the highest bidder happens to be an offshore entity, so be it," he said.
Vann said the deal would not be completed until September with approval needed from the Overseas Investment Office, including for sensitive land issues.
The tourism operator already worked in ski fields with leases on sensitive land. "We are keyed in to the fact of stewardship so that process doesn't scare or frighten me."
The takeover came about after Tourism Holdings approached the Australian firm looking to sell some leisure operations.
"It is actually taking us into a situation where we double in size," Vann said. "We've always stated that we wish to keep growing."
The acquisition would make MFS Living a more balanced company, with Tourism Holdings' summer demand smoothing out seasonal revenue driven by the ski season.
"No one part of our business will exceed about 25 per cent of our ebitda [trading profit]."
The company owned an aquarium in Bangkok which had failed to trade as desired because of geo-political issues. "Re-balancing ourselves back more into Australia-New Zealand, more stable political situations, is a desirable outcome of this transaction," Vann said.
The takeover would generate about A$1 million of synergy savings from removal of corporate duplication and MFS Living intended to apply for an overseas listing on the NZX.
The company planned to upgrade many of Tourism Holdings attractions, investing more than $50 million during the next two to three years.
