Dutch company to take control of Mooring Systems

Mooring Systems' 'virtual quay' in action.

Cavotec Group Holdings NV of the Netherlands and Mooring Systems (MSL) have agreed to merge in what is effectively a reverse takeover.

MSL will issue 8.7 shares to Cavotec for every MSL share that will leave Cavotec shareholders owning 80 per cent of the merged entity.

MSL planned to remain listed on the NZX and expected to be in the top 50 index.

MSL shares fell 4 cents to $4.11 when the sharemarket opened this morning. The stock, issued at 50 cents in 2000 has soared from 92 cents three years ago.

An independent valuation by accounting firm Deloitte ascribed a value on the unlisted Dutch firm of 92 million euros ($185m) while the mid point of the MSL valuation was $47m compared with its market capitalisation of $52m.

The proposal supported by the boards of both companies requires 75 per cent shareholder support. MSL chief executive Peter Montgomery, who owns 19 per cent of the company, supports the merger.

Cavotec has annual sales of $200m, staff of 460, and is a MSL's European licence holder for the MoorMaster range of automated ship mooring systems.

It specialises in the design and manufacture of innovative mobile power supply systems and the companies expect the merger to significantly boost sales.

On completion, MSL will be renamed Cavotec MSL Holdings, but will continue to be a New Zealand incorporated and publicly-listed company, headquartered in Christchurch.

MSL chairman Michael Cashin said it was the view of both boards that the merger proposal offers considerable benefits.

"For MSL, the merger should accelerate the growth future MoorMaster sales by providing access to Cavotec's strong and well-established international distribution, manufacturing and support network," he said.

"For Cavotec, the merger presents an excellent opportunity to expand its marketing and sales of the innovative MoorMaster product range from within Europe's borders to the entire globe."

The New Zealand base would allow it to push into the growing Pacific Rim markets.

Cavotec Chairman and chief executive Stefan Widegren, who would become the executive chairman of Cavotec MSL, said the merger added "another revolutionary technological" to Cavotec's product range and further broadens our presence in the Australasian market".

Cavotec MSL will now have seven manufacturing centres around the world, including one in Christchurch where the design team of the current MSL will continue to be located as a separate entity.

Cavotec has 5.8m shares on issue with 73 per cent owned by its management team. After the merger there will be 63.6m MSL Cavotec shares on issue compared with 12.7m at present.

Deloitte assessed the proposal as fair and reasonable to MSL shareholders. It assessed MSL will contribute 15.4 per cent of the value to the combined entity. The premium MSL shareholders would receive equated to $9.3m, or 30 per cent of MSL's standalone value.

However, Deloitte said this did not take account of the synergy benefits which it estimated would be worth between $20m and $40m. If the benefits were at the low end, MSL would capture most of these and as the benefits increased, more would accrue to Cavotec.

Deloittes said it was very difficult to accurately quantity the likely benefits.

"However, our high-level modelling suggests that a 15 per cent increase in total value our and above the combined standalone values appears to be achievable.

"We believe that it is unlikely that Cavotec would be prepared to pursue the proposed merger if it did not believe that at least this level of value enhancement could be achieved."

Although MSL has been valued at $54.6m over the last three months, Deloitte did not believe that was a reliable guide to its true value as it incorporated a "speculative premium". It said most shareholders would view MSL as a risky proposition.

Deloitte said MSL's ownership options narrowed considerably by entering a licensing agreement with Cavotec and a third party was unlikely to value MSL as highly as Cavotec.

Deloitte liquidity and the risk profile of MSL will improve after the merger.

MSL shareholders will be asked to vote on the proposal at an Extraordinary General Meeting on October 12. Cavotec shareholders will be required to sign acceptance forms by 30 September.

If the merger is approved, the effective merge date will be January 1.

- NZPA