George Kerr ups offer for Pyne Gould Corp

George Kerr. Photo / supplied

George Kerr's Australasian Equity Partners Fund has lifted its offer for Pyne Gould Corp by 12 per cent after talks with institutional investors.

AEP, the investment vehicle of major PGC shareholders Kerr and Californian hedge fund Baker Street Capital, raised its offer for the 66 percent of the company it doesn't already own to 37 cents a share from 33 cents and extended the closing date by seven days.

That lifts the total bid to some $52.9 million from $47.2 million. Kerr and Baker Street have already sewn up another 4.9 percent of the stock in a lock-up agreement with investors including Accident Compensation Corp.

The shares rose 13 percent to 36 cents on the NZX, just shy of the offer price. The bid is a 37 percent premium to the trading price before the offer was launched last week, but is only two-thirds of the value implied by the net tangible asset value of about 56 cents per share.

"The increased offer price is in response to feedback which AEP has received from several institutional shareholders," Kerr said in a statement. "The increased offer of 37 cents per share is an opportunity for investors with short-term needs or objectives to get liquidity at a substantial premium to the pre-offer price of 27 cents."

Some market commentators have called the offer 'low-ball', and that ill-feeling was expressed at the Nov. 1 annual meeting, where shareholders were less than enthusiastic about re-electing independent director Bruce Irvine, who's stepping down in February anyway, and electing executive director John Duncan to the board.

Kerr has previously told shareholders PGC is no longer a high-dividend stock and it's likely it will have to reinvest profits as a long-term investment and may need more capital to for other opportunities.

"As I have sad, PGC requires time, money and patience to build," Kerr said today. "While that suits long-term investors like myself, I do not believe it is suited to those with short-term income needs."

PGC shareholders should receive a target company statement and independent adviser's report as early as today, and Kerr said that should have enough information for them to make an informed decision as to the improved offer.

PGC chairman Brian Mogridge wasn't immediately available for comment.

Against the backdrop of Kerr's takeover bid, PGC subsidiary and another Kerr investment vehicle Torchlight Investment Group is in the process of taking over the management of ASX-listed property fund, having secured the target board's backing to take over the management of ING Real Estate Entertainment Fund at no cost. In exchange for the deal, Torchlight agreed to underwrite an A$15 million rights issue to the fund's unitholders.

The fund was part of Kerr's rescue package for Pyne Gould in 2009, which took the firm's distressed loans from the Marac Finance unit.

It gained public attention during the collapse of South Canterbury Finance after lending $100 million to the Timaru financier which had to be repaid before debenture holders under the government's retail deposit guarantee.

Last week, Torchlight emerged as the buyer of vacant residential land in Queenstown and Wanaka 15 months earlier.