Baycorp shares surge on Allco takeover offer

Shares in Baycorp Advantage surged this morning after Australian investment fund Allco Equity Partners yesterday said it has secured 17 per cent, and plans to spend up to A$470 million ($529 million) to take full control.

The duel-listed credit services company was trading up 57c, or 16.52 per cent, at $4.02, on the New Zealand market -- a year high.

Allco said it had spent A$136 million on its initial stake and intended to offer A$3.50 ($3.94) a share off-market for half of the remaining shares, which would take its final interest to about 58 per cent if successful.

UBS managing director Campbell Stuart said the share price reaction this morning indicated that Allco may need to go higher if its offer is to succeed.

"Obviously the reaction has seen that other people have paid higher in the market than what that offer equates to," he told NZPA.

Allco said that if successful it would propose that Baycorp make a capital return of A$269 million, or A$1.18 a share, funded through borrowings of A$275 million.

The acquisition is the first major investment for Allco Equity Partners (AEP), which listed in December 2004 with an initial public offering of A$550 million to invest in turnaround opportunities.

Baycorp was created in 2001 by the merger of New Zealand's Baycorp Holdings and Australia's Data Advantage, but has been hurt by low levels of bad debt, over servicing and tight margins.

"AEP will be an activist shareholder," managing director Peter Yates said in a statement, noting that Baycorp's share price had nearly halved since the 2001 merger.

Allco would seek a review of the entire business and look to address the group's inefficient capital structure, Mr Yates said.

The proposed capital return would allow Baycorp to refinance existing borrowings and ensure sufficient working capital, he said.

Shares in Allco last traded yesterday at A$1.50.

The offer is subject to Allco winning at least 50.1 per cent of Baycorp.

- NZPA