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Merger speculation has resurfaced between southern rivals Port Otago and publicly listed Lyttelton Port of Christchurch, 14 months after Port Otago spent $37 million to buy more than 10 per cent of its northern neighbour as a blocking stake.
Based on research suggesting a merger between the southern rivals is likely in the future, stockbroker ABN Amro Craigs has upgraded its 12-month target price for LPC shares from $2.35 to $2.75 and switched from a hold recommendation to buy.
For more than three years, the port sector has been threatened by rationalisation and the potential loss of shipping line calls to smaller ports, largely because the big shipping lines can pick and choose where to call.
ABN Amro investment adviser Peter McIntyre said the research prompting the upgrading of the 12-month target price was undertaken as the Government was considered unlikely to be averse to consolidation in the port sector.
Port assets had relatively dormant and unexploited value, consolidation would eventually come and, when reviewing overseas port consolidations, the prices paid had been high, McIntyre said.
"From a company perspective, we maintain the ownership of Lyttelton Port of Christchurch by Port Otago offers the boards of both companies the platform to set the structure for the South Island port industry."
Any mergers would need clearance by the Commerce and Securities commissions.
-OTAGO DAILY TIMES
